Essay On Monopoly Market

What and why of a monopoly market:

A pure monopoly is established when a single supplier is dominant in the market. For the purposes of regulation, monopoly power exists when a single firm controls 25% or more of a particular market. Essentially, monopoly is formed when a firm exerts exclusive ownership of a product that is either scare is nature or the quality produced is so supreme in comparison to others in the market, that the entire economy depends of the said firm to satisfy its needs of the product. Over a decade ago, Microsoft’s Window commanded over 95% share of the market. This was precisely due to the lack of availability of a quality substitute at that time. At times, government may grant a monopoly status to a firm. The East India

As with all firms, profits are maximised when MC = MR. (marginal cost = marginal revenue). In general, the level of profit depends upon the degree of competition in the market, which for a pure monopoly is zero. At profit maximisation, MC = MR, and output is Q and price P. Given that price (AR) is above ATC at Q, supernormal profits are possible. The same is depicted in the figure

More competition, it can be argued, puts downward pressure on prices and forces firms to use their resources in a more efficient manner, encouraging firms to reduce their average total costs by better utilization of resources.

But what if the total demand for a good in a particular market is not high enough to necessitate more than one firm producing the good in question? In other words, what if having more than one firm means that each individual producer will have higher average total costs than a single firm would have? Such a scenario exists if the market demand curve intersects a monopolist’s average total cost curve in the range in which economies of scale are experienced, in other words where ATC it still decreasing. This is known as a natural