Tuesday, April 17, 2012

Monopoly in a Product or Service Market

Monopolist come from the Greek words mono for 'one' and polist for 'seller'. Hence monopolist is a single seller of a particular product in a market. Monopoly is a market situation in which there is only one seller.
marginal revenue is the increment in total revenue that comes when output increases by one unit.
The maximum-profit comes to a monopolist at a quantity level where its marginal revenue is equal to its marginal cost.
Where as in perfect competition, the rational decision for a producer is MC = P. P does not change with quantity a single producer is offering in a perfect competition.
In a monopoly only one seller is in the market. Hence as he offers to sell more, marginal revenue comes down as price come down with increase in selling quantity.





Paul Samuelson and William D. Nordhaus, Economics, 13th Edition,  McGraw-Hill, 1989

Original Knol - http://knol.google.com/k/narayana-rao/monopoly-in-a-product-or-service-market/2utb2lsm2k7a/ 231

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