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Presented By NAWNIT KUMAR

CONTENTS
What is monopoly?

Characteristic of monopoly
Why barriers to entry? Monopoly Equilibrium

Break even point


Profit in monopoly Loss in monopoly Measuring monopoly power Indian Railway Price maker

What is monopoly?
Monopoly is a form of market structure in which a single seller or firm has control over the entire market supply, as there are no close substitutes for his product.
For example:- Indian Railway is a public monopoly industries

Characteristic of monopoly
Only one seller and many buyers No substitute

Price maker
Entry barriers:- There are legal, technological,

economical or natural obstacles, which may block the entry of new firm.

Why barriers to entry?


(1)Legal Barriers: patent - grant of an exclusive right to use a specific

process or produce a specific product for a period of time. licenses and franchises - permission, granted by a government, to enter an industry or occupation.
(2)Control of an essential resource:- It is essential because

to protect country or social welfare. For example- arm and ammunition industries, uranium refining company. DeBeers controls the worlds diamond trade.

(3) Economies of Scale:-Costs per unit in an industry may be low only when a firm produces a lot of output. Consequently, small firms will be unable to enter the industry because costs are too high.

Monopoly Equilibrium

Equilibrium point MR=MC

Break even point

Profit in monopoly

Profit area

AR=Demand AR=Demand

Loss in monopoly

P1 P2

AR=Demand

Measuring monopoly power


Lerners measure:- difference between price and marginal cost measures the degree of monopoly. A/c to him, degree of monopoly power is the reciprocal of the price elasticity of demand. Degree of monopoly power = (P MC) = P 1 e

Indian Railway
Indian Railways (IR) is largest railway system in Asia and the second largest in the World. The railways cover a total length of 63,940 km. IR operates more than 14,244 trains daily, including about 8,002 passenger trains.

(Rupees in crore)

PROFIT

Price maker
Every year, Indian railway minister give railway budget. According to 2011 railway budget Concession for male senior citizens has been increased by 10% to 40% no increase in freight rate. Reduction in AC1 - 7% and AC2 - 4% 5% discount across board for passenger fare beyond Rs50 for all suburban second class. Its motive not only profit maximization but also social welfare .

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