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In (today's world, most market structures fall somewhere between perfect competition and monopoly. A market is imperfectly competitive if the actions of one or more buyers and seller: have a perceptible influence on price. This broad definition of imperfect competition encompasses markets of many different types, which can be distinguished by further classification. Product and input markets are frequently classified according to the number of sellers and buyers, which the contain Product markets can be further classified with regard to differentiation.
Traditionally markets are classified on the basis of the number of sellers and buyers and the nature being sold the Important kinds or market structures are: (a) only one seller producing and selling a product which has no close substitutes.
(b) monopolistic competition, where many sellers compete to sell a differentiated product a market into which the of new sellers is possible; (c) oligopoly, where there are only few sellers so that there is interdependence among the sellers and the sellers are aware or lt. Each firm Lakes into account the rivals' reaction. The products produced may be homogenous (pure oligopoly) or differentiated products (differentiated oligopoly); and (d) perfect competition, where a large number of firms sell a homogenous product. In the first three markets, the demand curve of each firm slopes downward.
In monopoly market, there is only one seller producing and selling a product that has no close substitutes. The monopolist firm is the industry and the demand of the monopolist coincides with the industry demand. The monopolist can either change price or quantity. The price elasticity of demand faced by the monopolist is finite. Finally, since there is only one firm, entry is restricted or remote
The main causes that lead to monopoly are:
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ownership of strategic raw materials or exclusive knowledge of production techniques with
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patent rights for a product or production process
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economies of scale, or decreasing average costs
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government policies, and
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high entry costs.
A monopolist attains maximum profit when it meets two conditions (a) MR = MC and (b) slope of the marginal revenue should be less than the slope of the marginal cost curve.
Under conditions of perfect competition the supply curve of a firm can be determined from the AVC curve. The supply curve is upward rising on the assumption that the firm maximizes profits. There is one-to-one correspondence between price and quantity supplied in perfect competition.
However, under monopoly this unique relationship between price and quantity supplied is absent and is therefore, the supply curve of a monopolist is indeterminable.
When a lump sum tax is imposed, in case of a monopolist we need not distinguish between the short run and the long run as under perfect competition. This is because the monopolist generally realizes some excess profits both in the short run and the long run. The effects of imposition of a profit or specific sales tax are broadly the same with those in a perfectly competitive market.
A monopolist can charge different prices for the same good known as price discrimination. A firm (monopolist) can exercise price discrimination only when he has the ability to differentiate between consumers and consumers are unable to resell the product. There are many forms of price discrimination, but the standard method of classification identifies three types or degrees of discrimination — first, second and third. First-degree price discrimination involves charging the maximum price possible for each unit of output. Second-degree price discrimination is an imperfect Conn of price discrimination. Instead of setting different prices for each unit, it involves pricing based on the quantities of output purchased by individual consumers. Third-degree discrimination is the most commonly used form of price discrimination. It involves separating consumers or markets in terms of their price elasticity of demand.
Monopsony is a form of market, where there exists only one buyer and a large number of sellers, other conditions remaining the same as under monopoly. Bilateral monopoly is a market form where one buyer faces one seller. When bilateral monopoly exists, the single buyer and the single seller individually possesses some power to fix the price at which the transaction takes place between them.
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