Solution:
A perfectly competitive market has the following characteristics:
- homogeneity of products,
- the number of sellers is unlimited,
- free entry and exit in the market, i.e. absolute mobility of all resources.
Towards perfect competition it is forbidden carry...
A perfectly competitive market is characterized by...
A wider choice of products for the consumer is provided by manufacturers as part of …
Solution:
The most diverse needs of people are satisfied with the help of differentiated products. Such products are sold in the markets of monopolistic competition and oligopoly.
In a perfectly competitive market, the individual producer...
Solution:
In a perfectly competitive market, there is an unlimited number of participants, therefore, the volume of production of each firm is not large and the manufacturer is able to sell all his goods at a single price. The price in the market of perfect competition is unchanged, each unit of the product is sold at the same price, because no one is able to change the price (the volume of production of each firm is small in relation to the entire market). It changes only under the influence of market forces.
In a perfectly competitive market, a firm is in short-run equilibrium if the following conditions are met:
Solution:
The equilibrium of a competitive firm in short term is achieved under the condition , that is, when marginal revenue is equal to marginal cost, and the latter, in turn, exceed the average total cost. Therefore, a firm in a perfectly competitive market is in short-run equilibrium if:
- marginal revenue is equal to marginal cost;
Marginal cost is greater than average total cost.
The equilibrium of a competitive firm in the long run is achieved under the condition . That is, when its long-term, short-term marginal and average indicators coincide.
At the closing point of a competitive firm, the following conditions are satisfied:
Solution:
The firm will go out of business if the price is this low and will only recover average variable costs. Thus, the conditions for the equilibrium of the firm will be the equality of marginal revenue, marginal cost and the minimum value of averages variable costs. If the price is below the average gross cost, but above the average variable, then in the short term the company does not close, but tries to minimize losses.
Theme: Monopoly
Market power is...
Solution:
One measure of market power is the Lerner index, which is inversely proportional to the elasticity of demand for a good, and the Herfindahl-Hirschman index.
Examples of price discrimination include...
Solution:
Price discrimination is the sale of the same product to different consumers at different prices, and the difference in prices is not due to differences in production costs. Of the proposed options, examples of price discrimination would be:
- an action when, when buying two packs of toothpastes, they give a brush as a gift, since those who do not buy 2 toothpastes at once are in a discriminatory position, they do not have the opportunity to get a brush for free;
- selling movie tickets for a morning session is cheaper than for an evening one (separation of markets into expensive and cheap ones); prices are different, the film is the same, significant differences in the costs of showing the film in different time No.
The characteristics of a monopoly are...
The conditions for maximizing profits in a monopoly include ...
Solution:
The monopolist is in equilibrium at . A monopoly firm maximizes profit if:
- equal marginal revenue and marginal cost;
-price is above marginal revenue
1. Task (( 1 )) TK 1
The term "perfectly competitive firm" means that it is a firm...
R which does not affect the formation of the market price
other market participants
R can leave the perfectly competitive market at any time
2. Task (( 1 ))T3 1
When analyzing market structures, they usually distinguish _______________________________________ of type (model)
3. Task (( 1 )) TK 1
Distribute the types of market structures as the number of firms operating in them increases:
1: monopoly
2: oligopoly
3: monopolistic competition
4. Task (( 1 )) TK 1
Freedom to enter and exit the market is characteristic only for ...
R of perfect competition
5. Task (( 1 )) TK 1
The perfectly competitive market model is characterized by:
R set of small firms
R very easy conditions for entering the industry
R lack of control over the price
Average level
6. Task (( 1 )) TK 1
The supply curve of a competitive firm in the short run is:
R is the portion of the marginal cost curve above the average variable cost curve
7. Task (( 1 )) TK 1
A form of exchange without affecting the price of one's goods, but with the possibility of increasing profits by reducing costs and transferring capital to highly profitable industries is called ...
R perfect competition
8. Task (( 1 )) TK 1
If in the market everyone can manage their income and is responsible for the results of their activities, and the "invisible hand" sets the price for buyers and sellers, then this market is ...
R competitive
9. Task (( 1 )) TK 1
The market that best meets the conditions of perfect competition is...
R stocks and bonds
10. Task (( 1 )) TK 1
Correspondence between types of market structures and their characteristics:
23. The market of perfect and imperfect competition. Types of imperfect competition markets.
Task ((43 ))Т3 43
A market constraint on a competitive firm is that:
R market dictates a certain price level
12. Task (( 1 )) TK 1
Economic profit:
R cannot take place in a competitive market in the long run
13. Task (( 1 )) TK 1
In the short run, a profit maximizing firm will stop production if it turns out that...
R price is less than the minimum average cost
14. Task (( 1 )) TK 1
Marginal product in monetary terms (MRP), marginal product in
in physical terms (MP), unit price of output (P) in
conditions of perfect competition are subject to the following relationship ...
R MRP = MPxP
15. Task (( 1 )) TK 1
The conditions for perfect competition are:
16. Task (( 1 ))TK 1
A company minimizes losses under perfect competition if optimal volume production:
R price is above average variable cost but below average total costs
17. Task (( 1 )) TK 1
The characteristics of a perfectly competitive firm are:
R A firm is in equilibrium when its marginal revenue equals its marginal cost
R curves for average and marginal cost are U-shaped
R is the demand curve for the firm's product - a horizontal line
Monopoly
A basic level of
1. Task (( 1 )) TK 1
Price discrimination is:
R Selling the same product to different buyers at different prices
2. Task (( 1 )) TK 1
If in the market one seller dictates the price, and access of other sellers is impossible, then this is ...
R monopoly
3. Task (( 1 )) TK 1
Price discrimination refers to the market...
R monopoly
4. Task (( 1 )) TK 1
A monopoly is a market structure in which:
R there are blocking entry conditions
R There is one seller and several buyers in the market
5. Task (( 1 )) TK 1
A sign of only a monopoly market is:
R one seller
6. Task (( 1 ))TK 1
The monopoly that exists in an industry that exploits unique natural resources is called ...
R natural monopoly
Average level
7. Task (( 1 ))Т31
The negative consequences of market monopolization are:
R manufacturer (monopolist) loses interest in innovation
R the prerequisites are created for stagnation in the economy and the flourishing of the bureaucracy
R production efficiency drops
8. Task (( 1 )) TK 1
The main goal of antimonopoly policy is:
R competition support
9. Task (( 1 )) TK 1
A monopoly offers a product to the market.
R only unique
10. Task (( 1 )) TK 1
According to the Law of the Russian Federation "On competition and restriction of monopolistic activity on commodity markets» A firm is dominant if its market share is …
R is greater than 35%
11. Task (( 1 )) TK 1
As a barrier to entry into the monopolistic industry of new producers can serve as:
R patents and licenses
R lower costs large-scale production
R legislative registration of exclusive rights
12. Task (( 1 ))TK 1
In the long run, a monopolist, in contrast to a perfect competitor:
R is protected from competition from other firms
13. Task (( 1 )) TK 1
A natural monopoly occurs when...
14. Task (( 1 )) TK 1
In order to maximize profits, the monopolist must choose the output at which...
R marginal revenue equals marginal cost
15. Task (( 1 )) TK 1
Unlike a competitive firm, a monopoly seeks to...
R produce less and set the price higher
16. Task ((8)) TK 8 "
A market structure characterized by the clear dominance of one
buyer...
Correct answer: mon*pson#$#
17. Task (( 32 )) TK 32
A natural monopoly occurs when...
R enterprise extracts or owns scarce resources
18. Task (( 1 )) TK 1
A monopoly is likely to be:
R gas station in countryside
19. Task (( 1 )) TK 1
Function total costs monopolist TS =100 + 3Q, where Q is the quantity of products produced per month. The demand function for the monopolist's products P = 200 - Q, where P is the price of the monopolist's products. If a monopolist produces 20 units. products per month, then his total income will be ...
20. Task (( 1 )) TK 1
Under monopoly, the following statement is true:
R profit is maximum if marginal cost equals marginal revenue
21. Task (( 1 )) TK 1
A profit maximizing monopolist will reduce the price of its product if:
R marginal revenue is greater than marginal cost
22. Task ((46)) TK 46
An increase in the average cost of a monopolist leads to:
R an increase in price only if marginal cost also increases
23. Task ((72)) TK 72
The company that has monopoly power in the product market, but which does not have a monopsony in the factor markets, will hire:
R pay higher wages compared with competitive firms
24. Task (( 1 ))TK 1
A firm has monopoly power if it...
R sets the price based on the demand curve
Monopolistic competition and oligopoly
A basic level of
1. Task (( 1 )) TK 1
The cartel is...
R is a form of monopoly in which its participants, while maintaining commercial and industrial independence, agree among themselves on prices, market division, and the exchange of patents.
2. Task (( 1 )) TK 1
In an oligopoly, a business...
R agrees pricing policy with partners
3. Task (( 1 ))TK 1
An oligopoly is a market structure where...
R a small number of competing firms producing homogeneous or differentiated products
4. Task (( 1 )) TK 1
Imperfect competition models include:
R oligopoly
R monopsony
5. Task (( 1 ))Т3 1
A market structure in which a small number of competing firms produce a differentiated or standardized product is called...
Correct answers: *lig*gender#$#
6. Task (( 1 )) TK 1
Monopolistic competition is not characterized by:
R interdependence of sellers in setting prices
7. Task (( 1 )) TK 1
An oligopoly is a situation where an industry includes...
R from 2 to 10 firms
Average level
8. Task (( 1 )) TK I
To market structures in which firms do not receive
economic profit in the long run include:
R perfect competition
R monopolistic competition
9. Task (( 1 )) TK 1
Perfect and monopolistic competition markets have in common:
R There are many buyers and sellers in the market
10. Task (( 1 )) TK 1
If the market price is oriented towards the leader selling the bulk of the goods, and market access is limited by the scale of capital, then this is ...
R oligopoly
11. Task (( 1 )) TK 1
The founder of the theory of oligopoly is...
R A. Cournot
12. Task (( 1 )) TK 1
An oligopodietic market is similar to a monopolistic competition market in that:
R firms have market power
13. Task (( 1 )) TK 1
In conditions of monopolistic competition, the company produces:
R differentiated product
14. Task (( 1 )) TK 1
Non-price competition includes:
R product differentiation
15. Task((1))T31
The main principles of pricing in an oligopolistic market include:
R conspiracy in price
R price leadership
R price cap
16. Task (( 1 )) TK 1
The form of a monopoly in which its participants, while maintaining commercial and industrial independence, agree among themselves on prices, market division, and the exchange of patents is called:
Correct answers: kart*l#$#
17. Task (( 1 ))Т3 1
Association of entrepreneurs, which undertakes the implementation of all commercial activities while maintaining the production and legal independence of the enterprises included in it, it is called:
Correct answers: S*ndika*
18. Task ((33))ТЗЗЗ
A tacit agreement on prices, division of markets and other ways to limit competition is ...
R conspiracy
19. Task (( 1 ))Т3 1
A characteristic manifestation of the non-cooperative behavior of an oligopoly is ...
R price war
High level
20. Task (( 1 )) TK 1
A cartel member’ could increase his profits by:
R by selling your product at a lower price than other cartel members
R conducting active non-price competition
21. Task (( 1 )) TK 1
If a firm operating in the market does not receive economic profit in the long run, then such a firm operates in the industry:
R of perfect competition
R monopolistic competition
22. Task (( 1 ))Т31
Monopolistic competition occurs in markets for goods whose elasticity of demand is...
R is usually high
23. Task (( 1 )) TK 1
Demand for firms' products under monopolistic competition...
R is more elastic than that of a pure monopolist, but less elastic than that of a perfectly competitive firm.
Conditions and meaning of the market of perfect competition, its advantages and disadvantages
Competition (from lat.
Perfect competition market Basic level
concurro - "to run together") - pro-
confrontation, rivalry between participants in the market
farm for the most favorable production conditions
and marketing of goods and services in order to obtain maximum
The main conditions for the emergence of competition:
1) complete economic (economic) isolation of each
dogo commodity producer;
2) the complete dependence of the commodity producer on the market situation
3) opposition to all other commodity producers in the struggle
without consumer demand.
Competition is the most important element of the market, playing a role
crucial role in improving the quality of products, works and services,
decline production costs, in the development of technical
novelties and discoveries.
In various sectors of the economy, there are different
standing competition. Between the poles pure competition
and pure monopoly are monopolistic competition
tion and oligopoly
Perfect
Competition Imperfect competition
Rice. 7.1. Types of competition
Perfect (pure) competition includes intra-
sectoral and intersectoral competition. Intra-industry
competition (between producers of homogeneous products)
leads to technical progress, reducing production costs
management and commodity prices. Interindustry competition (between
manufacturers of different goods) allows you to find the scope of more
profitable investment.
By the number of producers and buyers in the market,
type of product, the ability to control the price, use
call methods of non-price competition, ease of entry
in the industry of new firms, it is possible to single out markets of pure competition
rents, monopolistic competition, oligopoly, pure
monopoly. The last three are characterized as non-corresponding markets.
perfect competition (Table 7.2).
Perfect (pure) competition is a market system
tuation when numerous, independently acting products
drivers sell identical (standardized) products
induction, and none of them is able to control
market price.
The main characteristics of a perfect (pure) con-
smoking:
1) the market has a large number of buyers and sellers,
each holds a relatively small share of the data market
2) identical, standardized products, goods of the same
are homogeneous in terms of customer needs and, accordingly,
Responsibly, sellers;
3) free access to the markets of new sellers and the possibility
the possibility of the same free exit from them, entry and exit from
industries is absolutely free;
4) availability of complete and accessible information for participants
exchange about prices and their changes, about sellers and buyers
lyakh; economic entities must have one
volume of information about the market.
Positive phenomena of competition:
1) cost reduction;
2) rapid implementation of scientific and technical progress;
3) flexible adaptation to demand;
Characteristic features of types of competition
4) high quality products;
5) an obstacle to overpricing.
Negative phenomena of competition:
1) the ruin of many subjects of the market economy;
2) anarchy and crisis of production;
3) overexploitation of resources;
4) environmental violations.
In order to provide better marketing opportunities for our
products sellers use various methods of con-
competitive struggle:
1) price competition. Manufacturer in order to create on
market for their products more favorable conditions
and undermining a competitor's position lowers the price by means of
reduction of production costs;
2) non-price competition. Raising the technical level,
product quality, the creation of substitute goods,
Perfect competition, monopolistic competition, oligopoly, monopoly: comparative characteristics of market models
Under the market structure, it is customary to understand the totality of many specific features and traits that reflect the features of the organization and functioning of a particular industry market. The concept of market structure reflects all aspects of the market environment in which the firm operates - the number of firms in the industry, the number of buyers in the market, the characteristics of the industry product, the ratio of price and non-price competition, the bargaining power of an individual buyer or seller, etc. n. Theoretically, there can be a large number of market structures. Nevertheless, many economists consider it possible to simplify the analysis by resorting to a typology of market structures based on several basic parameters - signs of an industry market.
1. Number of firms in the industry. The presence or absence of an individual firm's ability to influence the market equilibrium will depend on the number of sellers operating in a given industry market. Other equal conditions, at in large numbers firms in a given market, any attempt by an individual firm to influence market supply by reducing or increasing individual supply will not lead to any significant changes in market equilibrium. In this case, the market share of each particular firm is insignificant. A different situation will arise when the firm's market share is large, i.e., one or more large firms. Such a firm has the opportunity to influence the market supply, and hence the market equilibrium and market price.
2. Control over the market price. The degree of control of an individual firm over price is the most striking indicator of the level of development of competitive relations in the industry market. The greater the individual producer's control over price, the less competitive the market is.
3. The nature of the products sold on the market - a standardized or differentiable product is produced by the industry. Product differentiation means that in a given market different firms offer products designed to satisfy the same need, but differ in different parameters. There is such a dependence here: the higher the degree of differentiation (heterogeneity) of industry products, the more the company has the opportunity to influence the price of its goods and the lower the degree of competition in the industry. The more standardized (homogeneous) an industry product is, the more competitive the market is.
4. Conditions for entry into the industry, which is associated with the presence or absence of barriers to entry into the industry. The presence of such barriers will prevent the entry of new firms into a given industry market and, consequently, the development of industry competition.
5. Presence of non-price competition. Non-price competition takes place if the industry product is differentiable. Non-price competition - competition in relation to the Quality of products, services, location and availability, as well as advertising.
Depending on the content of each feature and their combination, different types are formed. industry markets(different market models) - perfect competition, monopolistic competition, oligopoly and pure monopoly.
Based on the presented characteristics, it is possible to give definitions various types market structures:
perfect competition- a model of the market, which is characterized by price competition between manufacturers of standardized products that are not able to influence the market equilibrium and the market price. A market structure that does not meet at least one of the conditions of perfect competition is an imperfectly competitive market. Markets of imperfect competition, in turn, are represented by markets of pure monopoly, monopolistic competition, oligopolistic markets;
pure monopoly- a type of market structure characterized by a lack of competition, which implies dominance in the market closed by entry barriers of one firm that produces a unique product and controls the price;
monopolistic competition- a type of market structure, within which sellers of differentiated products compete with each other for sales volumes, and non-price competition acts as the main reserve for achieving competitive advantage in the market;
oligopoly- a type of market structure in which several interdependent and often interacting firms compete with each other for market share (sales volumes).
PERFECT COMPETITION - a type of market structure, where the market behavior of sellers and buyers is to adapt to the equilibrium state of market conditions.
IN economic theory perfect competition is called this type of market organization, in which all types of rivalry are excluded both between sellers and between buyers.
Perfect competition is a scientific abstraction, an ideal type of market structure, serves as a benchmark for comparison with other types of market structures.
Perfect competition has the following features:
a) many small sellers and buyers;
b) product homogeneity, i.e., products offered by competing firms are identical and interchangeable;
c) free entry into the market and exit from the market (the absence of barriers to entry or barriers to exit from the market for existing firms);
d) perfect awareness (perfect knowledge) of sellers and buyers about the state of the market. Information is distributed among market participants instantly and costs them nothing;
e) sellers and buyers cannot influence prices and take them for granted;
f) mobility of production resources.
MONOPOLISTIC COMPETITION A type of market structure, consisting of many small firms producing differentiated products, and characterized by free entry into the market and exit from the market.
The concept of "monopolistic competition" goes back to the book of the same name by the American economist Edward Chamberlin, published in 1933.
Monopolistic competition, on the one hand, is similar to the position of a monopoly, since individual monopolies have the ability to control the price of their goods, and on the other hand, it is similar to perfect competition, since it assumes the presence of many small firms, as well as free entry into the market and exit from the market, that is, the possibility of the emergence of new firms.
A market with monopolistic competition is characterized by the following features:
a) the presence of many sellers and buyers (the market consists of a large number of independent firms and buyers);
b) free entry and exit from the market (the absence of barriers to prevent new firms from entering the market, or obstacles to existing firms leaving the market);
c) heterogeneous, differentiated products offered by competing firms. Moreover, the products may differ from one another in one or a number of properties (for example, in chemical composition);
d) perfect awareness of sellers and buyers about market conditions;
e) influence on the price level, but within a rather narrow framework.
OLIGOPOLY - a market structure in which very few sellers dominate the sale of any product, and the emergence of new sellers is difficult or impossible.
The product of different sellers can be both standardized (for example, aluminum) and differentiated (for example, cars).
Oligopolistic markets are dominated, as a rule, by two to ten firms, which account for half or more of total product sales.
The word "oligopoly" was introduced by the English humanist and statesman Thomas More (1478-1535) in the world-famous novel Utopia (1516).
Oligopolistic markets have the following features:
a) a small number of firms big number buyers. This means that the volume of the market supply is in the hands of a few large firms, which sell the product to many small buyers;
b) differentiated or standardized products. In theory, it is more convenient to consider a homogeneous oligopoly, but if the industry produces differentiated products and there are many substitutes, then ϶ᴛᴏ the set of substitutes can be analyzed as a homogeneous aggregated product;
c) the presence of significant barriers to entry into the market, i.e. high barriers to entry into the market;
d) firms in the industry are aware of this interdependence, so price controls are limited. Only firms with large shares in total sales can influence the price of a product.
MONOPOLY - a type of market structure in which there is only one seller who controls the entire industry of production of a certain product that does not have a close substitute.
A market dominated by a monopoly is the exact opposite of a competitive market where there are many competitors offering standardized goods for sale.
Distinguish three kind of monopoly.
closed monopoly. It is protected from competition: legal restrictions, patent protection, copyright institution.
natural monopoly- an industry in which long-run average costs reach a minimum only when one firm serves the entire market. With natural monopolies, which are based on economies of scale, monopolies based on the ownership of unique natural resources are closely related.
open monopoly- a monopoly, in which one firm, at least for certain time, will sole supplier product, however, has no special protection from competition. Firms that first entered the market with new products are often in a similar position.
Such a distinction between monopolies is rather arbitrary, since some firms may simultaneously belong to several types of monopolies.
Pure monopoly– ϶ᴛᴏ a situation where there is a single seller of a product, and ϶ᴛᴏ this product has no close substitute in other industries.
Pure monopolies are now rare. More often there are markets in which several firms compete with each other. Pure monopolies and traditionally can only exist under the patronage of the state. Moreover, they are inherent in local markets rather than national ones. Moreover, the concept of pure monopoly would be an abstraction. There are many goods for which there are no substitutes.
Pure monopoly is characterized by the following main features:
A) one firm and many buyers, i.e., there is a single producer on the market selling this product to many small buyers. If in this market single seller opposes and the only buyer, then such a market is called a bilateral monopoly;
b) lack of substitute products(there are no perfect substitutes for the monopolist's product);
V) lack of ϲʙᴏbod to enter the market(to the industry)
Perfect competition market model. The income and profit of the firm
That is, there are practically insurmountable barriers to entry. The entry barriers are as follows:
- economies of scale (one of the most common types of barriers to entry);
- legal restrictions: patents, tariffs and quotas in international trade;
- high entry costs are economic barriers. In some industries (for example, in aviation industry) the start of production can be very expensive;
- advertising and product differentiation. Advertising activities contribute to the formation of confidence and respect of buyers in relation to well-known trademarks. Product differentiation, either alone or in combination with extended advertising, can increase the bargaining power of existing producers and create barriers to entry;
- monopolist control of sources of income necessary raw materials or other specialized resources;
- high fare, contributing to the formation of isolated local markets, as a result of which a single industry in a technological sense can represent many local monopolists;
G) the monopoly firm sets the price for the ϲʙᴏth good, rather than accepting it as a given, as a market reality;
e) perfect awareness.
Perfect competition market model
The main features of the market structure of perfect competition in the most general form have been described above. Let's take a closer look at these characteristics.
1. The presence on the market of a significant number of sellers and buyers of this good. This means that no seller or buyer in such a market is able to influence the market equilibrium, which indicates that none of them has market power. The subjects of the market here are completely subordinated to the market element.
2. Trade is carried out in a standardized product (for example, wheat, corn). This means that the product sold in the industry by different firms is so homogeneous that consumers have no reason to prefer the products of one firm to those of another manufacturer.
3. The inability for one firm to influence the market price, since there are many firms in the industry, and they produce a standardized product. In conditions of perfect competition, each individual seller is forced to accept the price dictated by the market.
4. Lack of non-price competition, which is associated with the homogeneous nature of the products sold.
5. Buyers are well informed about prices; if one of the producers raises the price of their products, they will lose buyers.
6. Sellers are not able to collude on prices, due to the large number of firms in this market.
7. Free entry and exit from the industry, i.e., there are no entry barriers blocking entry into this market. In a perfectly competitive market, it is not difficult to create new company, there is no problem if an individual firm decides to leave the industry (since firms are small, there is always an opportunity to sell a business).
An example of a perfectly competitive market is a market certain types agricultural products.
For your information. In practice, none of existing markets is unlikely to meet all the criteria for perfect competition listed here. Even markets that are very similar to perfect competition can only partially satisfy these requirements. In other words, perfect competition refers to ideal market structures that are extremely rare in reality. Nevertheless, it makes sense to study the theoretical concept of perfect competition for the following reasons. This concept allows you to judge the principles of functioning small firms existing in conditions close to perfect competition.
The model of perfect competition and the conditions for its occurrence
This concept, based on generalizations and simplification of analysis, allows us to understand the logic of the behavior of firms.
Examples of perfect competition (of course, with some reservations) can be found in Russian practice. Small market vendors, tailors, photo shops, car repair shops, construction crews, apartment renovation specialists, peasants at food markets, stall retail can be regarded as the smallest firms. All of them are united by the approximate similarity of the products offered, the insignificant scale of the business in terms of the size of the market, the large number of competitors, the need to accept the prevailing price, that is, many conditions for perfect competition. In the sphere of small business in Russia, a situation very close to perfect competition is reproduced quite often.
The main feature of a perfectly competitive market is the lack of price control by an individual producer, i.e., each firm is forced to focus on the price set as a result of the interaction of market demand and market supply. This means that the output of each firm is so small compared to the output of the entire industry that changes in the quantity sold by an individual firm do not affect the price of the good. In other words, a competitive firm will sell its product at a price already existing in the market.
Since an individual producer is unable to influence the market price, he is forced to sell his products at the price set by the market, i.e., at P0.
The firm operates in a perfectly competitive market. Dependence of total costs
The firm operates in a perfectly competitive market. The dependence of total costs on output is presented in the table:
The market price was 40 rubles.
1. How many products should a firm produce in order to achieve maximum profit? What will be the profit?
2. Starting at what price can the firm operate at a profit?
3. At what price would it be more profitable for the firm to stop production? Consider the short term.
Solution:
1. Multiplying the daily output by 40, we get the total revenue. Profit is equal to the difference between total revenue and total costs:
Daily output, thousand pieces H 0 10 20 30 40 50 60
Total costs, thousand rubles TC 500 620 700 900 1240 1750 2400
Total revenue, thousand rubles TR 0 400 800 1200 1600 2000 2400
Profit, thousand rubles f -500 -220 100 300 360 250 0
From the table we see that the maximum profit, equal to 360 thousand rubles, will be with a daily output of 4 thousand units of production.
2. The firm operates at a profit if the price is set above the level of the minimum average total cost.
Characteristics of a perfectly competitive market
To find them, we divide the total cost of production.
Daily output, thousand pieces H 0 10 20 30 40 50 60
Average amounts, costs, rub. ATS - 62 35 30 31 35 40
The minimum value is 30 rubles. If the price is set above 30 rubles, the firm is operating at a profit.
3. The firm stops production if it is unable to cover even variable costs, i.e. if the price is set below the minimum average variable cost. To find them, we divide the variable costs of output. Variable costs can be found by subtracting fixed costs equal to 500 thousand rubles from the total costs. (total costs at zero volume of production).
Daily output, thousand pieces H 0 10 20 30 40 50 60
Variable costs, thousand rubles VC 0 120 200 400 740 1250 1900
Average AC costs, rub. AVC - 12 10 13.3 18.5 25 31.7
The minimum value of average variable costs is 10 rubles. If the price is set below 10 rubles, the firm stops production.
The main types of the market. Properties of perfect competition and its distinctive features.
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The behavior of each enterprise is influenced by the nature, type of market in which it operates. The type of market depends on the type of product, the number of enterprises (firms), the presence or absence of restrictions on entry and exit from the industry, the availability of information on prices, innovations, etc. There are the following main types of markets or market structures: pure (perfect) competition, monopoly, monopolistic competition, oligopoly.
Markets by type of competition: 1) The market of free (perfect) competition: all sellers and buyers have equal rights and opportunities.
2) The market of imperfect competition: the market of pure monopoly, monopolistic competition.
Markets by area: - local, -national, -regional, -global.
Types of markets by volume of purchase and sale:
1) Market for goods and services: Exists in the form of commodity exchanges, enterprises wholesale trade, fairs and auctions.
2) Markets for factors of production (consumer goods): Purchase and sale of land, minerals, technical resources.
3) The labor market.
4) Market of scientific and technical developments and innovations.
There is also another classification of market types, namely, according to the level of development and independence:
- free market;
- illegal market;
- regulated market.
Competition is a struggle between producers, between suppliers of goods (sellers) for market leadership. Competition involves the struggle of producers and suppliers for the most favorable production conditions, areas of capital investment, sources of raw materials, markets.
Perfect, free or pure competition- economic model, an idealized state of the market, when individual buyers and sellers cannot influence the price, but form it with their contribution of supply and demand. In other words, this is a type of market structure where the market behavior of sellers and buyers is to adapt to the equilibrium state of market conditions.
Features of perfect competition:
- The number of sellers tends to infinity
All firms produce exactly the same (identical) goods and services.
- Equal accessibility in terms of location and time spent by all firms.
-All buyers are absolutely informed about the existence of all sellers and ratings for their goods and services
The simplest and initial type of market is the market of perfect competition ("pure competition"), characteristic features which are:
- there are many buyers and sellers interacting in the market;
- the products they offer are homogeneous;
- firms freely enter the market or leave it;
- since the share of each competitive firm in the total supply is insignificant, the firm adapts to the price set by the market and cannot regulate it.
Disadvantages of a perfectly competitive market:
- no economic profit in the long run main source NTP;
- contributes to the unification and standardization of the product, which does not meet the requirements of the modern buyer;
- cannot be extended to the production of public goods;
- superseded by monopolies and oligopolistic structures.
22. Profit maximization of a competitive firm in the short run (TR-TC comparison principle, MR-MC comparison principle, MR(P) = MC rule).
The main goal of any firm is to maximize the gross profit Tp. It is defined as follows: Tp = TR - TC.
Gross (total) income,
or gross revenue. TR (total revenue), - the total amount of proceeds from the sale of a certain amount of goods: TR = P Q,
Where R -
the price of the product, Q
- volume of sales.
If Tp is negative, the firm incurs a gross loss.
Marginal profit Mp is the extra profit from the sale of each additional unit of output. Marginal profit is equal to the difference between marginal revenue and marginal cost: Мp = MR - MC.
In other words, marginal profit is the change in gross profit associated with the production of each additional unit of output.
The general rule that, with this approach, allows the firm to determine the optimal volume of production: the firm will receive the maximum gross economic profit, or minimum gross loss, at such an optimal, most profitable level of production, at which marginal revenue (marginal revenue) and marginal cost are equal: MR = MC.
Equal Marginal Revenue (MR) Marginal Cost Rule (MC.) Marginal revenue is the revenue earned from the sale of each successive unit of output. MR=TRn-TRn-1. And in conditions of perfect competition, it is equal to the market price.
MR=TRn-TRn-1=P·Qn-P·Qn-1= P(Qn-Qn-1); but since Qn-Qn-1 =1, then MR=P.
3 distinctive features of the rule:
1. The rule assumes that the firm would rather produce than close at MR=MC, but MR>AVC (average variable cost).
2. The MR=MC rule is valid in all markets and for any firms (purely competitive or monopolistic).
3. The MC=MR rule can be formulated in a slightly different form if applied to pure competition, since in conditions of pure competition MR=P, then MC=P, that is, in order to maximize profit, it is necessary to produce such a volume of production at which P= MS (determination of the optimal volume of output).
23. Imperfect competition: monopoly. Conditions for the existence of a monopoly. Barriers to entry into a monopoly market. Maximization of income and profits of the monopolist. Antitrust policy .
Monopoly A market structure in which one firm is the supplier of a product that has no close substitutes on the market.
A monopoly-dominated market is in stark contrast to free market where competing sellers offer a standardized product for sale. The access of other firms to a monopolized market is difficult or impossible, as there are barriers that prevent competitors from entering the industry.
A pure monopoly is an industry consisting of one firm that is the only producer of a product or service that has no analogues. Buyers have no choice, there are no alternatives and they buy this product at the price dictated by the monopolist. There is no price or non-price competition.
Bargaining power increases as fair competition weakens.
Conditions for the existence of a monopoly
A pure monopoly occurs where there is only one seller and there are no real alternatives: there are no close substitutes, and the product produced is homogeneous or unique. A monopoly appears in the market when there are entry or exit barriers to entry or exit from an industry.
Monopoly Features:
1) there is 1 seller on the market (one firm)
2) there are no similar products on the market
3) monopolist-price dictator
4) entry into the monopolistic market is blocked, because there are a number of barriers.
Monopoly Barriers:
1)Determined by production technology
2) the cost of entry (exit costs) is high, the risk is high.
3) related to patents and licenses
4) power over important species raw materials
5) fear of violence and sabotage.
The more the monopolist wants to sell, the lower the unit price must be. Because of the law of demand, marginal revenue—the increase in revenue per unit increase in sales—decreases as sales increase. In order for the monopolist's total revenue not to decrease, the price decrease (that is, the monopolist's loss on each additional unit sold) must be compensated by a large percentage increase in sales. Therefore, it is expedient for a monopolist to carry out its operations in the elastic part of demand.
As output rises, the monopolist's marginal cost rises (or at least stays the same). The firm will expand output as long as the incremental revenue from selling an extra unit of a product is greater than, or at least not less than, the incremental cost of producing it, because when the cost of producing an extra unit of output exceeds the incremental revenue, the monopolist suffers a loss.
The monopolist may, in order to maximize profit, refuse to increase output even if marginal and average costs of production are reduced.
Antitrust policy is a system of measures aimed at strengthening and protecting competition by limiting the monopoly power of firms.
Among the main directions of the antimonopoly policy of the state are:
§ direct price regulation;
§ taxation;
§ regulation of natural monopolies.
24. Features of the oligopolistic market. Forms of oligopolistic behavior. Oligopolistic demand curve .
Oligopoly- characterized by a small number of sellers, which means that the decision to determine prices and volumes of production is interdependent, i.e. each firm is influenced by decisions made by competitors and must take them into account in its own behavior in the field of pricing and determining volumes.
Entry into oligopolistic industries is difficult.
The most important characteristic of an oligopoly market is that each firm's share of sales is substantial. This circumstance forces other firms competing with it to reckon with its actions. In other words, each of the firms in such a market, when developing economic policy takes into account the possible reaction of other firms to their actions. This interdependence of the behavior of firms in an oligopolistic market is called strategic behavior. The latter extends to all areas of market competition:
- pricing policy of firms;
- volume of their sales;
– product differentiation;
– investment policy;
- product promotion strategy;
– innovation policy, etc.
Oligopoly occupies a middle position between perfect competition and absolute monopoly, which means that it has some features of both models. From perfect competition, she "got" the presence of competitors, and from monopoly - power over price. Therefore, we can conclude that the firm, changing the price of its product or the volume of production, must take into account the response of other oligopolists. Thus, we get two more important characteristics oligopoly - the interdependence of oligopolists and strategic interaction. In addition, another hallmark is the differentiation (heterogeneity) of manufactured products (which does not occur under either perfect competition or monopoly).
(An oligopolistic market can be represented by both a standardized (pure oligopoly) and a differentiated (differentiated oligopoly) product. Regardless of this, oligopolistic markets are always characterized by firms having significant market power and a decreasing demand curve for the products of each individual firm. However, their peculiarity is in the fact that in the conditions of oligopolistic interaction (reacting to each other's actions), firms are faced not only with the reaction of consumers, but also with the reaction of their competitors.Therefore, unlike the previously considered market structures, with an oligopoly, a firm is limited in decision-making not only sloping demand curve, but also by the actions of competitors.)
Characteristic features of an oligopoly:
1. Few firms in the industry. Usually their number does not exceed ten (steel and automotive industries, production of building materials).
2. High barriers to entry into the industry. They are associated with economies of scale.
Models of markets of perfect (pure) and imperfect competition
In addition to economies of scale, oligopolistic concentration is generated by a patent monopoly (Xerox, Kodak, IBM), a monopoly of control over rare sources of raw materials, and high advertising costs.
3. Universal interdependence. Each of the firms in the formation of its economic policy is forced to take into account the reaction from competitors.
There are 2 main forms of behavior of firms in the conditions of oligopolistic structures: non-cooperative and cooperative. When non-cooperative behavior each seller independently solves the problem of determining the price and volume of output.
Cooperative behavior means that firms agree on output volumes and prices.
The demand curve is determined based on market research. It reflects the average output of goods at a given price, taking into account expected variations in demand. In turn, the "normal" demand curve is used to calculate the "normal" price of the good.
"Broken" (or "curving") demand curve- the theory of oligopoly, which characterizes the behavior of firms in the market if they do not enter into agreements when setting prices. The model is based on the assumption about the possible reaction of firms to price changes by competitors. An oligopolist will have a "broken" demand curve if its competitors support any price cuts it makes but not any price increases.
1. Task (( 1 )) TK 1
A perfectly competitive firm means that a firm...
R which does not affect the formation of the market price
other market participants
R can leave the perfectly competitive market at any time
2. Task (( 1 ))T3 1
When analyzing market structures, they usually distinguish _______________________________________ of type (model)
3. Task (( 1 )) TK 1
Distribute the types of market structures as the number of firms operating in them increases:
1: monopoly
2: oligopoly
3: monopolistic competition
4: perfect competition
4. Task (( 1 )) TK 1
Freedom to enter and exit the market is characteristic only for...
R of perfect competition
5. Task (( 1 )) TK 1
The perfectly competitive market model is characterized by:
R set of small firms
R very easy conditions for entering the industry
R lack of control over the price
Average level
6. Task (( 1 )) TK 1
The supply curve of a competitive firm in the short run is:
R is the portion of the marginal cost curve above the average variable cost curve
7. Task (( 1 )) TK 1
A form of exchange without affecting the price of one's commodity, but with the possibility of increasing profits by reducing costs and transferring capital to highly profitable industries is called ...
R perfect competition
8. Task (( 1 )) TK 1
If in the market everyone can manage their income and is responsible for the results of their activities, and the "invisible hand" sets the price for buyers and sellers, then this market is ...
R competitive
9. Task (( 1 )) TK 1
The market that best meets the conditions of perfect competition is...
R stocks and bonds
10. Task (( 1 )) TK 1
Correspondence between types of market structures and their characteristics:
11. Task ((43 ))Т3 43
A market constraint on a competitive firm is that:
R market dictates a certain price level
High level
12. Task (( 1 )) TK 1
Economic profit:
R cannot take place in a competitive market in the long run
13. Task (( 1 )) TK 1
In the short run, a profit maximizing firm will stop production if it turns out that...
R price is less than the minimum average cost
14. Task (( 1 )) TK 1
Marginal product in monetary terms (MRP), marginal product in
in physical terms (MP), unit price of output (P) in
conditions of perfect competition are subject to the following relationship...
R MRP = MPxP
15. Task (( 1 )) TK 1
The conditions for perfect competition are:
16. Task (( 1 ))TK 1
An enterprise minimizes losses in a perfectly competitive environment if, at the optimal level of production:
R price is above average variable cost but below average total cost
17. Task (( 1 )) TK 1
The characteristics of a perfectly competitive firm are:
R A firm is in equilibrium when its marginal revenue equals its marginal cost
R curves for average and marginal cost are U-shaped
R is the demand curve for the firm's product - a horizontal line
Monopoly
A basic level of
1. Task (( 1 )) TK 1
Price discrimination is:
R Selling the same product to different buyers at different prices
2. Task (( 1 )) TK 1
If in the market one seller dictates the price, and access of other sellers is impossible, then this ...
R monopoly
3. Task (( 1 )) TK 1
Price discrimination refers to the market...
R monopoly
4. Task (( 1 )) TK 1
A monopoly is a market structure in which:
R there are blocking entry conditions
R There is one seller and several buyers in the market
5. Task (( 1 )) TK 1
A sign of only a monopoly market is:
R one seller
6. Task (( 1 ))TK 1
The monopoly that exists in an industry that exploits unique natural resources is called ...
R natural monopoly
Average level
7. Task (( 1 ))Т31
The negative consequences of market monopolization are:
R manufacturer (monopolist) loses interest in innovation
R the prerequisites are created for stagnation in the economy and the flourishing of the bureaucracy
R production efficiency drops
8. Task (( 1 )) TK 1
The main goal of antimonopoly policy is:
R competition support
9. Task (( 1 )) TK 1
A monopoly offers a product to the market.
R only unique
10. Task (( 1 )) TK 1
According to the Law of the Russian Federation "On Competition and Restriction of Monopolistic Activity in Commodity Markets", a firm occupies a dominant position if its market share ...
R is greater than 35%
11. Task (( 1 )) TK 1
As a barrier to entry into the monopolistic industry of new producers can serve as:
R patents and licenses
R lower costs of large production
R legislative registration of exclusive rights
12. Task (( 1 ))TK 1
In the long run, a monopolist, in contrast to a perfect competitor:
R is protected from competition from other firms
13. Task (( 1 )) TK 1
14. Task (( 1 )) TK 1
In order to maximize profits, the monopolist must choose the output at which...
R marginal revenue equals marginal cost
15. Task (( 1 )) TK 1
Unlike a competitive firm, a monopoly seeks to...
R produce less and set the price higher
16. Task ((8)) TK 8 "
A market structure characterized by the clear dominance of one
buyer...
Correct answer: mon*pson#$#
17. Task (( 32 )) TK 32
A natural monopoly occurs when...
R enterprise extracts or owns scarce resources
18. Task (( 1 )) TK 1
A monopoly is likely to be:
R gas station in the countryside
19. Task (( 1 )) TK 1
The function of the total costs of the monopolist TS = 100 + 3Q, where Q is the quantity of products produced per month. The demand function for the monopolist's products P = 200 - Q, where P is the price of the monopolist's products. If a monopolist produces 20 units. products per month, then his total income will be ...
20. Task (( 1 )) TK 1
Under monopoly, the following statement is true:
R profit is maximum if marginal cost equals marginal revenue
21. Task (( 1 )) TK 1
A profit maximizing monopolist will reduce the price of its product if:
R marginal revenue is greater than marginal cost
22. Task ((46)) TK 46
An increase in the average cost of a monopolist leads to:
R an increase in price only if marginal cost also increases
23. Task ((72)) TK 72
A firm that has monopoly power in the product market but does not have a monopsony in the factor markets will hire:
R pay higher wages than competitive firms
24. Task (( 1 ))TK 1
A firm has monopoly power if it...
R sets the price based on the demand curve
Monopolistic competition and oligopoly
A basic level of
1. Task (( 1 )) TK 1
The cartel is...
R is a form of monopoly in which its participants, while maintaining commercial and industrial independence, agree among themselves on prices, market division, and the exchange of patents.
2. Task (( 1 )) TK 1
In an oligopoly, a business...
R coordinates its pricing policy with partners
3. Task (( 1 ))TK 1
Oligopoly is a market structure where...
R a small number of competing firms producing homogeneous or differentiated products
4. Task (( 1 )) TK 1
Imperfect competition models include:
R oligopoly
R monopsony
5. Task (( 1 ))Т3 1
A market structure in which a small number of competing firms produce a differentiated or standardized product is called...
Correct answers: *lig*gender#$#
6. Task (( 1 )) TK 1
Monopolistic competition is not characterized by:
R interdependence of sellers in setting prices
7. Task (( 1 )) TK 1
An oligopoly is a situation where an industry has...
R from 2 to 10 firms
Average level
8. Task (( 1 )) TK I
To market structures in which firms do not receive
economic profit in the long run include:
R perfect competition
R monopolistic competition
9. Task (( 1 )) TK 1
Perfect and monopolistic competition markets have in common:
R There are many buyers and sellers in the market
10. Task (( 1 )) TK 1
If the price in the market is focused on the leader selling the bulk of the goods, and market access is limited by the scale of capital, then this ...
R oligopoly
11. Task (( 1 )) TK 1
The founder of the theory of oligopoly is...
R A. Cournot
12. Task (( 1 )) TK 1
An oligopodietic market is similar to a monopolistic competition market in that:
R firms have market power
13. Task (( 1 )) TK 1
In conditions of monopolistic competition, the company produces:
R differentiated product
14. Task (( 1 )) TK 1
Non-price competition includes:
R product differentiation
15. Task((1))T31
The main principles of pricing in an oligopolistic market include:
R conspiracy in price
R price leadership
R price cap
16. Task (( 1 )) TK 1
The form of a monopoly in which its participants, while maintaining commercial and industrial independence, agree among themselves on prices, market division, and the exchange of patents is called:
Correct answers: kart*l#$#
17. Task (( 1 ))Т3 1
An association of entrepreneurs that undertakes the implementation of all commercial activities while maintaining the production and legal independence of its constituent enterprises is called:
Correct answers: S*ndika*
18. Task ((33))ТЗЗЗ
A tacit agreement on prices, the division of markets and other ways to limit competition is ...
R conspiracy
19. Task (( 1 ))Т3 1
A characteristic manifestation of the non-cooperative behavior of an oligopoly is ...
R price war
High level
20. Task (( 1 )) TK 1
A cartel member "could increase his profits:
R by selling your product at a lower price than other cartel members
R conducting active non-price competition
21. Task (( 1 )) TK 1
If a firm operating in the market does not receive economic profit in the long run, then such a firm operates in the industry:
R of perfect competition
R monopolistic competition
22. Task (( 1 ))Т31
Monopolistic competition occurs in markets for goods whose elasticity of demand is...
R is usually high
23. Task (( 1 )) TK 1
Demand for the products of firms under monopolistic competition ...
R is more elastic than that of a pure monopolist, but less elastic than that of a perfectly competitive firm.
5. Characteristics of the market of perfect competition
Perfect (pure) competition is the rivalry of numerous producers, in which the influence of each participant is economic. process on the general situation of the market is so small that it can be neglected. In conditions of perfect competition, there are a very large number of firms producing a standardized product. The main and features of perfect competition are:
1) A very large number of independently operating sellers, usually offering their products in a highly organized market. An example is stock Exchange and market in. currencies;
2) Standardized products. Competing firms produce standardized or homogeneous products. At a given price, the consumer does not care which seller to buy the product from. In a competitive market, the products of firms B, C, D, and so on, are viewed by the consumer as exact analogues of firm A's product. Due to product standardization, there is no basis for non-price competition, that is, competition based on differences in product quality, advertising or sales promotion;
3) "Agreeing with the price." In a purely competitive market, individual firms exercise little control over the price of output. This property follows from the previous two. Under pure competition, each firm produces such a small fraction of its total output that an increase or decrease in its output will have no appreciable effect on the total supply, and therefore the price of the product. To illustrate, let's assume that there are 10,000 competing firms, each currently producing 100 units. The total volume of supply is thus 1 million units. Now suppose that one of these 10,000 firms cuts its output to 50 units. Will it affect the price? No. And the reason is clear: the reduction in output by one firm has an almost imperceptible effect on the total supply - more precisely, the total supply decreases from 1 million to 999950 units. This is obviously not a sufficient change in the volume of supply in order to noticeably affect the price of the product. A separate, competing manufacturer agrees on a price. He cannot set a new market price, but only adapts to it, that is, he agrees with the price.
In other words, the individual competing producer is at the mercy of the market; the price of a product is a given quantity, which the producer has no influence on. A firm can get the same unit price for either more or less output. Request a higher price than the current one market price, would be useless. Buyers will not buy anything from firm A at a price of 30.5 rubles if its 9999 competitors sell an identical product, or therefore an exact substitute, for 30 rubles. a piece. On the contrary, due to the fact that firm A can sell as much as it considers necessary, at 30 rubles. apiece, there is no reason for her to prescribe any more low price, for example 29.5 rubles. Indeed, if she did so, it would cause a decrease in her profits;
4) Free entry and exit from the industry. New firms are free to enter and existing firms are free to leave. competitive industries. In particular, there are no major obstacles - legislative, technological, financial and other - that could prevent the emergence of new firms and the marketing of their products in competitive markets.
As a result of all this, in such a market, none of the sellers and buyers is able to exert a decisive influence on the price and scale of sales. However, such a model of competition and pricing practically does not exist in reality.
6. Characteristics of the market of imperfect competition
the best way characteristics of the market model of imperfect competition yavl. comparing the latter with the market model of perfect competition and identifying differences between them. So first let's say. words about the market of perfect competition (this is an ideal model, since it does not exist in reality). The market model of perfect competition is characterized by the following features: 1. the presence of many independent sellers and buyers on the market, each of which produces or buys only a small share of the total market volume this product; 2. homogeneity of goods and the same perception by buyers of sellers; 3. the absence of entry barriers for entry into the industry of new manufacturers and the possibility of free exit from the industry; 4.full awareness of all market participants; 5.rational behavior of all market participants.
Now, based on the differences in the above points, we will try to outline a model of the imperfect competition market.
Speaking about the market of imperfect competition, one can delve into the analysis, for example, of oligopoly or monopolistic competition, which are yavl. real subjects of the market of imperfect competition, however, the impact, especially the analysis, of these subjects is not yavl. our task, therefore, we confine ourselves to considering the features of a pure monopoly. A monopoly can be described as a market structure in which one firm is supplier to the market of a product that does not have close substitutes. A monopoly product is unique in the sense that there are no good or close substitutes for that good. From the buyer's point of view, this means that there are no viable alternatives, leaving the buyer to either buy the product from the monopolist or do without it. In contrast to the subject of the market of perfect competition, which "agrees with the price", the monopolist dictates the price, that is, exercises significant control over the price. And the reason is obvious: it produces and therefore controls the total supply. With a descending demand curve for its product, the monopolist can cause a change in the price of the product by manipulating the quantity of the product offered. One of the most important hallmarks monopoly yavl. the presence of barriers to entry into the industry, that is, restrictions that prevent the entry of additional sellers into the market of a monopoly firm. Barriers to market entry are necessary to maintain monopoly power. Among the main types of barriers to market entry that enable monopolies to emerge and help maintain them are the following:
1. Exclusive rights received from the government.
2. Patents and copyrights, which give creators of new products or works of literature, art and music exclusive rights to sell or license the use of their inventions and creations. Patents may also be granted for manufacturing technologies. Patents and copyrights provide monopoly positions for only a limited number of years. After the expiration of the patent, the barrier to entry into the market disappears.
3. Ownership of the entire supply of any production resource. An example of this is the position of De Beers in the diamond market, which has monopoly power in the diamond market due to its control over the sale of about 80% of rough diamonds suitable for jewelry making.
Any unique ability or knowledge can also create a monopoly. Talented singers, artists or athletes have a monopoly on the use of their services.
A natural monopoly is an industry in which long-run average costs reach a minimum only when one firm serves the entire market. An example of a natural monopoly is water supply, telephone communications, mail within any particular region. It should be noted that in such industries, economies of scale are especially pronounced, and at the same time, competition is not feasible.
Summing up the assessment of the market model of imperfect competition, it should be noted with all fairness that monopoly and perfect competition yavl. two extreme forms of market structure. Real market structures lie between these two extremes.
