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Lecture 8 (Imperfect Market (Regulator (Rules Effectiveness, Discipline),…
Lecture 8
Imperfect Market
Regulator
Rules Effectiveness
Discipline
Entry restricted for new firms
Resources, Money & Time construct imbalance
small numbers of buyers & sellers
information flood
Market position unknown
competition exists
Different product with small changes are sold
contracting
Breakeven
Production factors are not mobile
Market is not ideal
MR=P, Covering Fixed Cost
Market of credit
Characteristics of Monopoly
Single Firm
In monopolist market there is a single seller or a producer or a group of producers offering a particular product. Under monopoly, the firm itself is an industry
Price Setter
The entire control of supply is in the hands of monopolist firm. This advantage enables the monopolist firm to set its own price of the product.
No similar substitute available
The product monopolist sells has no close or perfect substitute available in the market.
Block Entry
There are many barriers (e.g. Legal, technical, economic, high initial investment etc.) on entry of the new firm to the monopolist market.
MC=MR
where revenue is increasing
less expenditure control costs
Less production and more profit maintain equilibrium
Types of Imperfect Markets
Monopoly
Under monopoly there is only one seller or producer exists in the market and he has full control over the price of a good.
Monopolistic Competition
Monopolistic competition is a form of imperfect competition where large number of producers exist in the market selling products that are differentiated by brand or quality, hence they are not perfect substitutes.