MONOPOLYJohn Alfred C. Albina

What is MONOPOLY?• A market structure characterized by a

single seller of a unique product with no close substitutes. 

• Monopoly is a market in which a single firm is the only supplier of the good. 

Kinds of MONOPOLY• NATURAL MONOPOLY• GEOGRAPHIC MONOPOLY• TECHNOLOGICAL MONOPOLY

Characteristics of Monopoly• PROFIT MAXIMIZER: Maximize Profit

• PRICE MAKER: Decides the price of the goods or products to be sold

• HIGH BARRIERS TO ENTRY: Other sellers are unable to enter the market of the monopoly.

• SINGLE SELLER:  In a monopoly there is one seller of the good which produces all the output.

• PRICE DISCRIMINATION: A monopolist can change the price and quality of the product.

SOURCES OF MONOPOLY POWER• ECONOMIC BARRIERS– ECONOMIES OF SCALE– CAPITAL REQUIREMENTS– TECHNOLOGICAL SUPERIORITY– NO SUBSTITUTE GOOD– CONTROL OF NATURAL RESOURCES– NETWORK EXTERNALITIES

• LEGAL BARRIERS

• DELIBERATE ACTIONS

ECONOMIC BARRIERS

ECONOMIES OF SCALE

Monopolies are characterized by decreasing costs for a relatively

large range of production.

ECONOMIC BARRIERS

CAPITAL REQUIREMENTS

Production processes that require large investments of capital, or large

research and development costs or substantial sunk costs limit the

number of companies in an industry.

ECONOMIC BARRIERS

TECHNOLOGICAL SUPERIORITY

A monopoly may be better able to acquire, integrate and use the best possible technology in producing its

goods while entrants do not have the size or finances to use the best

available technology

ECONOMIC BARRIERS

NO SUBSTITUTE GOODS

A monopoly sells a good for which there is no close substitute.

ECONOMIC BARRIERS

CONTROLS OF NATURAL RESOURCES

A prime source of monopoly power is the control of resources that are

critical to the production of a final good.

ECONOMIC BARRIERS

NETWORK EXTERNALITIES

The use of a product by a person can affect the value of that product to

other people. 

LEGAL BARRIERSLegal rights can provide opportunity to

monopolize the market of a good. Intellectual property rights, including patents and copyrights, give a monopolist exclusive control of the production and selling of certain goods.

Property rights may give a company exclusive control of the materials necessary to produce a good.

DELIBERATE ACTIONSA company wanting to monopolize a

market may engage in various types of deliberate action to exclude competitors or eliminate competition. Such actions include collusion, lobbying governmental authorities, and force 

PROFIT MAXIMIZATION IN MONOPOLY

MR = MC RULE 

VISION-FIRST PHARMACEUTICAL COMPANY

AVERAGE REVENUE: Because Vision-First Pharmaceutical is a monopoly, this AR curve is the market demand curve for Banana Plus, which is negatively-sloped due to the law of demand.

MARGINAL REVENUE: The green line labeled MR depicts the marginal revenue of VFPC receives from Banana Plus production. Because VFPC is a price maker, the MR curve is also negatively-sloped line.

VISION-FIRST PHARMACEUTICAL COMPANY

MARGINAL COST: It has a negative slope for the amount of output, then the is slope is positive for larger quantities due to the law of diminishing marginal returns Profit Maximization: Profit is maximized at the quantity of output found at the intersection of marginal revenue and marginal cost curves, which is 6 ounces of Banana Plus. This is the same profit maximizing level identified using the total revenue and total cost curves.

PRICE DISCRIMINATIONPERFECT PRICE DISCRIMINATION( Discrimination among units )

SECOND-DEGREE PRICE DISCRIMINATION

( Discrimination among quantities )

THIRD-DEGREE PRICE DISCRIMINATION( Discrimination among buyers )  

MONOPOLY in the PHILIPPINES

Organized in 1892Began in 1895Philippines’ largest distributor of Electrical

Power

MONOPOLY in the PHILIPPINES

Provider of water in 17 municipalities and cities comprise the west zone of greater Metro Manila. (7.2 M people)

MONOPOLY in the PHILIPPINES

First Branch: North Edsa ( 1978 )

MONOPOLY in the PHILIPPINES

 state-owned railway company in the Philippines, operating a single line of track on Luzon.

-END-THANK YOU!!!