A monopoly presupposes the fulfillment of the following conditions: 1. The monopolist is the only producer of this product; 2. The products are unique in nature and have no close substitutes; 3. Penetration into the industry for other firms is blocked by a number of barriers; 4. The degree of influence of the monopolist on the market price is very high.

Barriers to entry into a market with a monopoly: 1. exclusive rights obtained from the government or local authorities; 2. patents and copyrights; 3. ownership of resources, such as sources of raw materials; 4. the advantage of low costs of large-scale production.

A closed monopoly is protected from competition through legal restrictions and prohibitions (most often it is a government monopoly). An open monopoly is a monopoly in which one firm, at least for some time, becomes the sole supplier of a product, but has no special protection from competition. A natural monopoly occurs in an industry in which long-run average costs are at a minimum only when one firm serves the entire market. An artificial monopoly is an association of enterprises created for the sake of obtaining excess profits and establishing market power.

Features of the interaction of supply and demand in a monopoly market The monopolist has a certain power over the market, since he alone determines the supply of goods. In addition, he has power over the price of the product, but this power is not absolute, since the price also depends on demand, and supply depends on the price.

Determining how high a monopolist's price can be is related to demand and its elasticity. Prices can be raised if the corresponding reduction in demand does not lead to a drop in the monopoly's income and profits. Otherwise, in order to increase income, the monopoly is forced to increase production, which implies a certain reduction in price in accordance with the law of supply and demand. Q P D1 D2 P1 P2 Q1Q2 Q3 Q4

A monopoly searches for prices guided by the same rule as enterprises operating in a perfect market: 1. The volume of production and corresponding supply of goods must be such that marginal costs (MC) are equal to marginal revenue (MR): MC = MR 2. The monopolist considers MC and MR as the basis for setting the price - it should not be lower than them. However, in a monopolistic enterprise, unlike enterprises operating in conditions of perfect competition, marginal revenue is less than price (P) and, accordingly, average revenue (AR): MR

Monopolistic pricing rule: P = AR > MC = MR MC= MR"> MC= MR"> MC= MR" title=" Monopolistic pricing rule: P = AR > MC= MR"> title="Monopolistic pricing rule: P = AR > MC = MR"> !}

Problem 1. The fixed costs of the monopoly are 1,500 rubles. The dependence of the monopoly's variable costs on the volume of output is presented in the table: VC, rub Q, pcs. There is data on the volume of demand for the monopoly's products at various price levels: P, rub Qd, pcs. Determine: 1. What volume of production will the monopoly choose and the corresponding level prices; 2. Monopoly profit.

Q, pcs. FC, rub. VC, rub. TC, rub. ATS, rub. MS, rub. R, rub.Qd, pcs. TR, rub. МR, rub. We summarize the obtained data in a table:

From the data in the table it follows that the equality MR=MC is achieved at Q = 4. We will find the price level corresponding to this volume from the demand scale: P=2600. The profit of the monopoly is found as the difference between TR and TS: = 4400 rubles. Answer: the monopoly will choose a production volume equal to 4, the corresponding price level = 2600, monopoly profit = 4400.
Problem 2. A profit-maximizing company is a monopolist in the domestic market, where the demand for its products is given by the function: Qd = 90-2.5P. On the foreign market, it can sell any quantity of products at a fixed world price. The firm's total cost function has the form: TC = Q² +10Q+50. Determine the foreign market price if it is known that the firm sold ¾ of its output on the domestic market.

Solution: Let m be the world market price for the monopolist’s products; The company will sell products in the domestic market until its MRinternal. will not be equal to MR of the external market, i.e. m. That. the volume of production and sales in the domestic market is determined by the equality: MR internal. = m MR extr. = m After this, the equilibrium of the monopolist is determined by the condition: MC = m (similar to the condition of a market with perfect competition) Thus. the total volume of production and sales is determined from the equality: MC=m MC=m

In the domestic market, the production volume (q) will be: Qd=90-2.5pPd=36-0.4q MR=TR׳=(Pd*q)׳=(36q-0.4q׳ MR=TR׳=(Pd* q)׳=(36q-0.4q²)׳ =36-0.8qMR=m36-0.8q=mq=1.25(36-m) Total production volume (Q): MS=TC׳= (׳ = 2Q +10 MC=TC׳= (Q² +10Q+50)׳ = 2Q +10MC=m2Q+10=mQ=(m-10)/2 From the condition that q=3/4Q, we find: 1.25( 36-m)= 3/4 (m-10)/2 1.25(36-m)= 3/4 (m-10)/2 m=30 m=30 Answer: foreign market price = 30.

Slide presentation

Slide text: Monopoly in a market economy Economics lesson Iskandarov I.R.

Slide text: Monopoly (from the Greek mono - one, poleo - seller) is the exclusive right to carry out any type of activity (production, trade, fishing, etc.), granted to one person, a certain group of persons or the state.

Slide text: Monopoly presupposes the following conditions: The monopolist is the only producer of this product; The products are unique in nature and have no close substitutes; Penetration into the industry for other firms is blocked by a number of barriers; The monopolist's influence on the market price is very high.

Slide text: Barriers to entry into a market with a monopoly: exclusive rights obtained from the government or local authorities; patents and copyrights; ownership of resources, such as sources of raw materials; advantage of low costs of large production.

Slide text: Advantages of low costs of large-scale production: ATS Q ATSk ATSm ATSk - average costs of a competitive company ATSm - average production costs of a monopolist company 1/2Q Qm

Slide text: Types of monopolies: Closed Open Natural Artificial

Slide text: A closed monopoly is protected from competition through legal restrictions and prohibitions (most often it is a state monopoly). An open monopoly is a monopoly in which one firm, at least for some time, becomes the sole supplier of a product, but has no special protection from competition. A natural monopoly occurs in an industry in which long-run average costs are at a minimum only when one firm serves the entire market. An artificial monopoly is an association of enterprises created for the sake of obtaining excess profits and establishing market power.

Slide text: Features of the interaction of supply and demand in a monopoly market A monopolist has a certain power over the market, since he alone determines the supply of goods. In addition, he has power over the price of the product, but this power is not absolute, since the price also depends on demand, and supply depends on the price.

Slide text: To measure monopoly power, the Lerner coefficient is used: L=(P-MC)/P, where L is the Lerner coefficient; P – price; MC – marginal cost.

Slide No. 10

Slide text: Determining how high a monopolist's price can be is related to demand and its elasticity. Prices can be increased if the corresponding reduction in demand does not entail a drop in the monopoly's income and profits. Otherwise, in order to increase income, the monopoly is forced to increase production, which implies a certain reduction in price in accordance with the law of supply and demand. Q P D1 D2 P1 P2 Q1 Q2 Q3 Q4

Slide No. 11

Slide text: A monopoly searches for prices guided by the same rule as enterprises operating in a perfect market: 1. The volume of production and corresponding supply of goods must be such that marginal costs (MC) are equal to marginal revenue (MR): MC = MR 2. The monopolist considers MC and MR as the basis for setting the price - it should not be lower than them. However, in a monopolistic enterprise, unlike enterprises operating in conditions of perfect competition, marginal revenue is less than price (P) and, accordingly, average revenue (AR): MR< P = AR

Slide No. 12

Slide text: Monopoly pricing rule: P = AR > MC = MR

Slide No. 13

Slide text: Features of the interaction of supply and demand in a monopoly market Q P MR MC (=S) D Q wholesale Рм ATC Pe E ATCm Qe Monopoly profit

Slide No. 14

Slide text: Problem 1. The fixed costs of the monopoly are 1,500 rubles. The dependence of the monopoly's variable costs on the volume of output is presented in the table: There is data on the volume of demand for the monopoly's products at various price levels: Determine: What volume of production will the monopoly choose and the corresponding price level; Monopoly profit. R, rub. 5000 3500 3100 2800 2600 2380 2100 Qd, pcs. 0 1 2 3 4 5 6

Slide No. 15

Slide text: Solution: Monopoly, when determining the optimal production volume, is guided by the rule: MR=MC To solve the problem it is necessary to find MR, MC and ATS. TC=FC+VC; MC = (TCn-TCn-1)/(Qn –Qn-1); ATC= TC/Q; МR = (TRn-TRn-1)/(Qn –Qn-1); TR= P*Qd.

Slide No. 16

Slide text: We summarize the obtained data in a table: Q, pcs. FC, rub. VC, rub. TC, rub. ATS, rub. MS, rub. R, rub. Qd, pcs. TR, rub. MR, rub. 0 1 2 3 4 5 6 1500 1500 1500 1500 1500 1500 1500 0 1000 1500 2500 4500 7000 10000 1500 2500 3000 4000 6000 8500 11500 - 250 0 1500 1333 1500 1700 1916 - 1000 500 1000 2000 2500 3000 5000 3500 3100 2800 2600 2380 2100 0 1 2 3 4 5 6 0 3500 6200 8400 10400 11900 12600 - 3500 2700 2200 2000 1500 700

Slide No. 17

Slide text: From the table data it follows that the equality MR=MC is achieved at Q = 4. We will find the price level corresponding to this volume from the demand scale: P=2600. The profit of the monopoly is found as the difference between TR and TS: 10400-6000 = 4400 rubles. Answer: the monopoly will choose a production volume equal to 4, the corresponding price level = 2600, monopoly profit = 4400.

Slide No. 18

Slide text: Graphic solution to the problem: 1 2 3 4 5 6 0 Q 1000 1500 2000 2500 3000 MR MC D 2600 ATC A

Slide No. 19

Slide text: Problem 2. A profit-maximizing company is a monopolist in the domestic market, where the demand for its products is specified by the function: Qd = 90-2.5P. On the foreign market, it can sell any quantity of products at a fixed world price. The firm's total cost function has the form: TC = Q² +10Q+50. Determine the foreign market price if it is known that the firm sold ¾ of its output on the domestic market.

Slide No. 20

Slide text: Solution: Let m be the world market price for the monopolist’s products; The company will sell products in the domestic market until its MRinternal. will not be equal to the MR of the external market, i.e. m. That. the volume of production and sales in the domestic market is determined by the equality: MR internal. = m After this, the equilibrium of the monopolist is determined by the condition: MC = m (similar to the condition of a market with perfect competition) Thus. the total volume of production and sales is determined from the equality: MC=m

Slide No. 21

Slide text: In the domestic market, production volume (q) will be: Qd=90-2.5p Pd=36-0.4q MR=TR׳=(Pd*q)׳=(36q-0.4q²)׳ =36- 0.8q MR=m 36-0.8q=m q=1.25(36-m) Total production volume (Q): MC=TC׳= (Q² +10Q+50)׳ = 2Q +10 MC=m 2Q +10=m Q=(m-10)/2 From the condition that q=3/4Q, we find: 1.25(36-m)=3/4(m-10)/2 m=30 Answer: price external market = 30.

Monopoly (from the Greek μονο - one and πωλέω - sell) -
this is a large capitalist enterprise,
controlling the production and marketing of one or
several types of products. This is the kind of structure
in which there is no competition in the market and
one company operates. She produces a unique,
a product that has no analogues and is protected from entry
to the market of new companies.

The main features of a monopoly:

One company is the manufacturer of this product and
sole service provider;
A monopoly product is unique in the sense that it does not exist
good or close substitutes from the buyer's point of view,
which means that there are no acceptable alternatives;
A pure monopolist dictates the price and enforces it
significant control;
If the monopolist is going to continue to exist,
then he will use all means to block entry into
industry of new firms.

Reasons for the emergence of monopolies

The desire to receive monopolistic profit - profit
above average, possible as a result of the fact that the consumer
lacking an alternative;
High share of fixed costs that require
one-time large investments in creating a business and in the case of
the emergence of competition does not pay off;
Legislative barriers to activities;
(licensing, certification)
Foreign economic policy. It is aimed at protecting the market
from foreign competition in order to support domestic
subjects.
Acquisitions and mergers of companies.

Types of monopolies

Natural monopoly (railway, systems
water supply) - enterprises united by a single sales
organization; state of the commodity market in which
satisfying demand in this market is more efficient in the absence
competition due to technological features of production.
State (closed) monopoly - a monopoly created
by the force of legislative barriers that determine product
boundaries of the monopoly market, subject of monopoly, form
control and regulation of its activities, as well as the competence
regulatory authority.
Open monopoly is a temporary situation that exists in
as a result of the emergence of a new technology or product during a period
until competitors have mastered this technology and production
of this product.

Forms of monopolistic associations

The need for antitrust policy

Due to the high level of concentration of economic resources,
monopolies create opportunities to accelerate technical
progress. However, these opportunities are realized in cases where
such acceleration contributes to the extraction of monopoly high
profits. Large firms with significant power are
a desirable phenomenon in economics, since by doing
research, they provide benefits to both themselves and society in
in general. But there is compelling evidence that monopolies play
a particularly important role in accelerating technological progress, no.
Antimonopoly policy is one of the areas of government
regulation of the economy, representing a complex of state
measures aimed against monopolization of production and market and
ensuring the development of competition among commodity producers.

The state does not strive to make all markets perfect
competitive, but attempts to eliminate serious market imperfections.
It creates an environment where competition is encouraged rather than monopolism,
where the first behavior option is more profitable than the second. Thus,
antimonopoly policy is a tool
administrative regulation of the economy, with the aim of
preventing economic imbalances or
socially undesirable changes, its main points
are:
protection and promotion of competition;
control over dominant firms
on the market;
price control;
protecting interests and promoting the development of small and medium-sized
business.

The main goal of the monopolist is to obtain
maximum profit. For this purpose the company operates
solely in their own interests, therefore
government regulation of monopolies is one
one of the main factors ensuring normal
functioning of the economy. Undoubtedly, in some
cases the existence of monopolies is justified
and necessary, but over these processes must
control to prevent
abuse of monopoly position.
Monopoly is a serious problem
market economy and requires immediate
control by the state. Based on
existing laws and adopting new ones, indeed
working laws aimed at limiting
monopoly power and preventing the creation of new
monopoly entities, carrying out effective
antimonopoly policy, it is possible to resolve this
problems.

Slide 2

Types of monopoly

Monopoly is a type of market structure in which there is only one seller of a product. 1. Pure monopoly: one seller for a product there are no close substitutes a large number of buyers perfect awareness of sellers and buyers there are barriers preventing new firms from entering the market a) open monopoly - no legal barriers b) closed monopoly - there are legal barriers 2. Natural monopoly - the activities of a single firm in an industry are more efficient due to significant economies of scale

Slide 3

Demand for the monopolist's products

P O Q D P1 D P O Q Absolutely inelastic demand for the monopolist's products. The price is limited only by ability to pay. To sell more products, the monopolist must reduce the price. P2 P3

Slide 4

Income of a monopolist company

The price reduction will apply not only to the additional unit of production sold, but also to all others.

Slide 5

Gross and marginal revenue of a monopolist firm

Gross income TR = P * Q Marginal income MR = TRn - TRn-1 TR Q TR 7.5 0 560 15 MR Q MR 7.5 0 150 D 15 D = P

Slide 6

Equilibrium condition for a monopolist firm

TR Q TR 0 560 TC max Q* With production volume Q*, profit (TR - TC) is maximum MR Q MR 0 D MC MR = MC Q*

Slide 7

Equilibrium of a monopolist firm

P Q MR 0 D MS AC Q* AC P TR = P * Q - gross income TC = AC * Q - gross costs Profit = TR - TC This is economic profit (excess profit) MR = MC< AC < P - условие равновесие монополии

Slide 8

Monopoly power indicator

AbbaLerner (1903 -1982) In 1934, A.P. Lerner introduced an indicator for measuring monopoly power, called the Lerner index (L) L = 0 ≤ L< 1 Чем ближеL к 1, тем выше степень монопольной власти L = 0 при совершенной конкуренции, т.к. МС=P

Slide 9

Price discrimination

Price discrimination is the sale of the same product at different prices to different consumers or groups of consumers, despite the fact that the differences in prices are not due to differences in production costs. Conditions for price discrimination: the possibility of reselling the product is excluded or severely limited; the seller is able to distinguish between buyers with different ability to pay

Slide 10

Price discrimination of the first degree

Price discrimination of the first degree (perfect price discrimination) - the monopolist sells each unit of goods to the buyer at his reservation price, that is, at the maximum price that the consumer agrees to pay. All consumer surplus goes to the monopolist.

Slide 11

D P O Q P 1 2 3 4 8 4 6 10 Examples of price discrimination of the first degree: - a private lawyer or doctor charges different prices to clients - on the market a seller sells the same product at different prices

Slide 12

Price discrimination second degree

With price discrimination of the second degree, prices are the same for all buyers, but differ depending on the conditions of sale of the product: on the quantity of products purchased (wholesale discounts, discount coupons...) on the conditions of purchase (with delayed delivery, etc.) on time differences ( air tickets)

Slide 13

Price discrimination of the second degree

D P O Q MR MC Q1 Qm P1 Pm The green rectangle is the profit of a monopolist who does not pursue a policy of price discrimination. The blue rectangle is the additional profit of a monopolist selling: at a price of P1 with a purchase volume of up to Q1; at a price of P2 with a purchase volume greater than Q1.

Slide 14

Slide 15

Price discrimination of the third degree

Third-degree price discrimination is a situation in which a monopolist sells goods at different prices to different groups of consumers with different elasticities of demand. The monopolist segments the market into groups: adults and children, citizens of the country and foreigners, men and women, etc.

Slide 16

D2 P О Q MR2 MC Q2 P2 D1 P О Q MR1 MC Q1 P1 “Expensive” market: low elasticity of demand “Cheap” market: high elasticity of demand It makes sense to carry out price discrimination if the firm’s gross income during discrimination (the sum of TR1 and TR2) is greater than with a single price for all buyers. TR2 = P2 * Q2 TR1 = P1 * Q1

Slide 17

Slide 18

Natural monopoly

A natural monopoly arises in an industry where the activities of a single firm are more efficient due to significant economies of scale in production. In such an industry, one firm can completely satisfy the entire demand for its product. Long-term average costs continue to decline over a long period of time as production increases (the share of fixed costs is high) Examples: utilities, telephone communications, railway transport

Slide 19

Q LMC 0 Q*M MR P Q2R P*M D LAC P2R The average (AC) and marginal (MC) cost curves go down all the time. Excess profit without regulation is shaded A - the optimal position under regulation, for a monopoly - only normal profit A

Slide 20

Consumer and producer surplus

Consumer surplus is the difference between the amount of money that the consumer would be willing to pay (equal to his marginal utility) and the amount actually paid. Producer surplus is the difference between the price received and the minimum price he would be willing to receive (equal to his marginal cost).

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Description of the presentation Presentation Topic 10 Monopoly on slides

Firm behavior in various market structures. Monopoly. Associate Professor, Department of Economic Theory, PGUPS Ph.D. n. M. L. Selezneva

1. The concept of monopoly, its characteristic features and types. 2. Determination of the price and volume of production by a monopolist firm. 3. Price discrimination. 4. Economic and social consequences of monopoly.

A market is considered absolutely monopoly if there is a single manufacturer of a product, and this product has no analogues in other industries. With an absolute monopoly, the boundaries of the firm coincide with the boundaries of the industry, so the demand curve for the products of the absolute monopolist coincides with the market demand curve. The purpose of a monopoly is to obtain the maximum possible income by controlling the price or volume of production in the market. This goal is achieved by monopolies thanks to monopoly prices, which provide profits above normal. 1. The concept of monopoly, its characteristic features and types.

In addition to absolute monopoly, there are some other types of monopolies in the market, these include: monopsony - this is a monopoly on the part of the buyer; bilateral monopoly - when one buyer is opposed by one seller - a monopolist.

The existence of a monopoly is impossible without the presence of sufficiently high barriers that prevent other producers from entering the monopolized market. The most important of these barriers include: legal, established by law - monopoly rights and privileges for the sale of goods and services and patents; economic barriers arising from economies of scale in production - because production costs are so low that they crowd out competitors; significant amounts of efficiently functioning capital make it impossible for new firms to enter the industry.

The role of a monopoly in the economy is twofold: their products are of high quality, and large-scale production allows them to reduce costs and save resources; Dominating the market and having high profits, the monopoly limits production; in the absence of competition, the incentive to use the results of technical progress is lost.

2. Determination of the price and volume of products by a monopolist company. A monopolist company is a price maker, that is, it controls not only the volume of products produced, but also its price. A monopolist can increase its revenue in two ways: by limiting production output and thereby maintaining high prices for it, or, conversely, by reducing prices and increasing production output. The law of demand indicates that high prices can be maintained with small sales volumes, and low prices correspond to large sales volumes.

P A BP 1 P 2 _ +F Change in revenue of a monopolist firm. PQ 0 F q 1 q 2 In order to sell its products, the monopoly has to reduce prices not only for an additional unit of production, but also for the entire output. Therefore, the firm's marginal revenue from selling each unit except the first will be less than the price. When selling q 1 units of product at price P 1, revenue TR 1= P 1 xq 1 will be the area OP 1 Aq 1. If sales volume increases to q 2, revenue TR 2= P 2 xq 2 will increase by the amount represented by the area of ​​the rectangle q 1 FBq 2 (P 2 x ∆ q) and will simultaneously decrease by an amount equal to the area P 2 P 1 AF (∆ Pxq 1). Therefore, ∆ TR = P 2 x ∆ q - ∆ Pxq 1. MR =∆ TR: ∆ q MR = Px ∆ q + qx ∆ P / ∆ q = P + q x ∆ P /∆ q. Due to the fact that the demand line has a negative slope, q x ∆ P /∆ q< 0. Поэтому MR < P.

10 R Q Ep >1 Ep< 1 Ep=0 TR=ma x MR0 5 MR=0 TR Q MR = 0 MR>0 MR1), a decrease in price leads to an increase in total revenue (MR >0). And vice versa, when demand is inelastic (Ep<1), снижение цены приводит к уменьшению выручки (MR <0). При этом кривая MR расположена выше горизонтальной оси, когда TR растёт, и ниже неё, если TR снижается. Следовательно, линия MR пересекает горизонтальную ось в точке Q* , обозначающей объём выпуска продукции, при котором общий доход достигает максимальной величины. Q* Q*

With the aim of increasing revenue, the monopolist will never produce in the volume represented by the inelastic part of the demand curve. Otherwise, the additional revenue from each subsequent unit of product will be a negative amount, which will lead to a decrease in total revenue.

To establish the value of the optimal output, that is, the output at which profit will be maximized and the firm will be in equilibrium, two approaches to determining the optimal volume of production are possible: the first is based on comparing total income with total costs, and the second - marginal income with marginal costs . Unlike perfect competition, where the total revenue curve of the price-stacker firm is a straight line, which is explained by a fixed level of marginal revenue equal to price, the monopolist's TR curve has a decreasing positive slope, reaching zero at the maximum point.

TR, T C p 2 p 1 p 0 0 q 0 q 1 q 2 Q А В А 1 В 1 TC -π TR - π + π - π A and B are the points of critical production volume. The company will make a profit by producing a volume of production from q 0 to q 2. The maximum profit can be obtained by producing q 1 units of output and will be p 2 –p 1. Comparison of total income with total costs

MR, MC p 1 0 K π B F A MR DL MC ATCComparison of marginal revenue with marginal costs Q MC=MR From point A, we lower the perpendicular to the horizontal axis, determining the optimal volume of production q 0. After this, we set the price at which the product can be sold - p 0. The price limit is purchasing power, that is, point B on the demand curve and the corresponding price p 1. Total revenue will be area 0 p 1 Bq 0, total costs area 0 p 0 Fq 0, respectively, profit can be represented by the area of ​​the figure p 0 p 1 BF. q 0 p

Unlike a competitive market, there is no supply curve in a monopolistic market. Therefore, under changing demand conditions, a monopolist firm, following the rule MC = MR, chooses a combination of price and volume of supply of goods that leads to profit maximization.

3. Price discrimination. Price discrimination refers to selling the same product at different prices to different buyers. However, differences in prices do not result from differences in production costs. Price discrimination occurs when a product cannot be purchased in one market and resold at a higher price in another. Therefore, price discrimination is usually carried out in the service sector.

There are three types of price discrimination: perfect discrimination, or first-degree discrimination, second-degree discrimination, and third-degree discrimination. Perfect discrimination occurs when a firm sets different prices for each unit of goods, that is, sells them at demand prices. That is, each buyer purchases products at the maximum price that he is able to pay. In reality, such discrimination almost never occurs, since the seller has no information about the purchasing power of consumers.

MC ATC D MRP Q qm A Pm P 1 P 2 F K 0 C The monopolist will sell each unit of product (q 1, q 2, ... Qm) at an individual price (p 1, p 2, ... pm). In this case, curve D will simultaneously turn out to be curve MR, since the marginal revenue from the sale of each unit of production will be equal to its price. Therefore, qk units of output will be sold, more than what was sold when there was no price discrimination (qk > qm). The volume of production increased as those buyers appeared on the market who previously could not afford to purchase the product at a price higher than the price Pm. Perfect price discrimination q 1 q 2 qk

Third degree price discrimination is that different prices are set for individual groups of buyers, and not for individual batches of goods. In this case, market segmentation takes place, that is, the identification of two or more groups of consumers with different sensitivity to price changes (different price elasticity of demand). Price discrimination of the second degree occurs when monopolists allocate several price levels, that is, some buyers receive discounts on the price of the product.

Price discrimination leads to the fact that some goods and services can be purchased by consumers who, in the absence of it, would not buy them at all. As a result, firms increase their income. The state usually encourages price discrimination, as it helps to somewhat smooth out inequality in consumption.

P P P D D TR TR 0 Q 0 QGross income and consumer surplus of a monopolist firm. a) one price b) three prices c) individual prices for each buyer

4. Economic and social consequences of monopoly. S, MC A B E C Pa Pm P 0 0 Q q 0 qm MR C compare perfect competition and monopoly with each other in terms of their impact on sales volume and the price level: 1. Price increases to Pm, and output decreases to qm. 2. Production capacity is underutilized as production volume is reduced.

Does a monopoly really lead to negative consequences? Positive economies of scale in production lead to a reduction in the monopolist's average costs, so that they become lower than the average costs of a competitive firm. Therefore, taking advantage of the advantages of production scale, using technology that is inaccessible to small firms, the prices offered by the monopolist may be lower than the prices offered by the competitive market. In this case, society benefits from monopolization. As a rule, this situation arises in industries that provide public services (gas, electricity, water supply, etc. companies). In this case, there is a natural monopoly.

NATURAL MONOPOLY IS an officially recognized inevitable monopoly on the production and sale of goods and services, in relation to which monopoly is determined either by the natural rights of the monopolist, or by considerations of economic benefit for the entire state and population. Natural monopolies arise in those areas where copyright law operates, because the author is a monopolist by law. On the other hand, it is beneficial for the state to have unified pipelines, energy networks, and railways. A state monopoly arises in those areas where its existence is due to considerations of public safety.

The areas of activity of subjects of natural monopolies include the following types of activities: transportation of oil and petroleum products through main pipelines, transportation of gas through pipelines, services for the transmission of electrical and thermal energy, rail transportation, services of transport terminals, ports, airports, services of public electrical and postal communications.

Pros and cons of natural monopolies: Pros: the ability to make maximum use of economies of scale in order to reduce costs per unit of production; the ability to mobilize significant financial resources; the possibility of using scientific and technological progress; the ability to follow uniform standards for manufactured products or services; intra-company hierarchy and a system of contractual relations, allowing to reduce losses from risk and uncertainty.

— the ability to determine the price level and shift costs to the end consumer, who is not able to exert a reverse influence on the manufacturer; - the ability to block technical progress; — the opportunity to “save” by reducing the quality of products and services provided; Cons:

It can be seen that in a natural monopoly, advantages become disadvantages and vice versa. This form of economic organization is deeply contradictory. It is not possible to clearly determine what outweighs the pros or cons. However, society cannot live in conditions of such uncertainty and dependence on natural monopolists. The market form of economic organization is not able to overcome or even weaken the effects of the negative factors of natural monopoly. The market mechanism for allocating resources does not work in this case. Society can resolve existing contradictions in only one way - by regulating natural monopoly.

Ways to regulate natural monopolies: 1. Direct government regulation through the determination of tariffs. In the Russian Federation, only the Federal Law “On Natural Monopolies” of August 17, 1995, which defines both the industries related to natural monopoly and the methods of its direct state regulation. 2. Bidding for a franchise - that is, for the right to conduct this economic activity. 3. The possibility of using price discrimination by the state against the monopolist.