Characteristics and assumptions of the monopoly
In this article you will find the characteristics and assumptions of the monopoly…
The monopoly is a particular form of market almost impossible to find nowadays, but it does have some interesting features.
The theory of monopoly is based on a fundamental assumption:
1. L ’ existence of one vendor controlling l ’ offer of a given market (There is then the presence of competitors).
2. L ’ l ’ uniqueness and homogeneity of the product (There are therefore possible substitutes.
3. The question is perfectly competitive. There is a large number of buyers and nobody is able to exert an influence on the price.
Aggregate demand (of the market) is decreasing compared to the price and is simultaneously the question of ’ Enterprise.
It instructs the monopolist the price that can be obtained in relation to quantities sold, the monopolist, to increase the number of sales will have to cut prices.
As the seller only can decide the price at which to sell its products, This ’ must not be too high to avoid being purchased by consumers, the number of sales is much less because the price is high.
The monopolist has the freedom and the power to set the market price, though certainly cannot oblige consumers to buy a particular product and is aware that the price of a product is high less products will sell. The monopolist chooses so quantity aware where the profit is maximum.
Here are some formulas for the profit of the monopolist:
Total revenue: RT = P x Q
Average revenue: Rme = P = RT/Q
Marginal revenue: RMA<P = ΔRT/ΔQ
Here is a graphical representation of the monopoly
As you can see from the graph the monopolist receives a positive profit if the sale price of the asset is greater than the average total cost. P = RMe>Rma = CMa