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Question
Explain any four features of monopoly
Solution
A monopoly is a type of imperfect market structure. The term ‘Monopoly’ is derived from the Greek word ‘Mono’ which means ‘Single’ and ‘Poly’ which means ‘Seller’.
In a monopoly, there is only one seller who controls the entire market supply for a product that has no close substitute.
According to Chamberlin, “Monopoly refers to a single firm, which has control over the supply of a product which has no close substitute.”
The following are the features of monopoly:
1. A Single Seller: In a monopoly, there is a single producer or seller in the market, i.e., a monopolist. The monopolist faces no competition from any other producer as he is the sole seller. But, the number of buyers is large.
2. Price Maker: In a monopoly, the seller himself fixes the price. He has complete control over the supply and there is no close substitute for his product. So, he can charge any price for the product. Therefore, the monopolist is the “price maker”.
3. Entry Barrier: Entry of the rivals is restricted due to legal, natural, and technological barriers which do not allow the competitors to enter the market.
4. No Close Substitute: The product sold by the monopolist is unique. There is no close substitute available for that product in the market. So, the buyers have no choice. They either have to buy the product from the monopolist or go without it. The cross elasticity of demand for the monopolist’s product is either zero or negative.
5. Complete control over the market supply: The market is completely controlled by the monopolist. He is the only one who manufactures or sells the goods.
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RELATED QUESTIONS
Choose the correct option:
Classification of markets on the basis of place
a) Local market, National market, International market
b) Very short period market, Local market, National market.
c) Short period market, National market, International market.
d) Local market, National market, Short period market.
Choose the correct option:
Under Perfect competition, sellers are
a) Price makers
b) Price takers
c) Price discriminators
d) None of these
Give economic term:
The point where demand and supply curve intersect.
Give economic term:
The cost incurred by the firm to promote sales.
Give economic term:
Charging different prices to different consumers for the same product or services.
Monopoly: Price discrimination:: ______ : Product differentiation
Type of market showing some but not all the features of a competitive market –
Number of firms producing differentiated products which are closely related –
Find the odd word
Market on the basis of place -
The interaction of demand and supply to determine price of a commodity in perfect competition is ______.
Product differentiation is the main feature of ______.
Assertion (A): Monopolist is a price maker.
Reasoning (R): Monopolist can fix the price of his own product as he controls the whole market supply.
Assertion (A): Product differentiation is the main feature of monopolistic competition.
Reasoning (R): Under monopolistic competition, all the products are perfect substitutes to each other
Distinguish Between
Short period and Long period
Distinguish Between
Monopoly and Monopolistic competition
State with reason whether you agree or disagree with the following statement:
Seller is the price maker under perfect competition.
State with reason whether you agree or disagree with the following statement:
There is product differentiation under monopolistic competition.
State with reason whether you agree or disagree with the following statement:
Selling cost is the only feature of monopolistic competition.
Study the following table, figure, passage and answer the question given below it.
| Price per unit in Rs. | Quantity demanded | Quantity supplied |
| 5 | 100 | 500 |
| 4 | ______ | 400 |
| 3 | 300 | ______ |
| 2 | ______ | 200 |
| 1 | 500 | ______ |
- Complete the table (2m)
- Derive the equilibrium price from the above table with the help of Suitable diagram. (2m)
- Mention the equilibrium point and equilibrium price in above diagram. (2m)
- Explain the concept of equilibrium price with the help of above diagram (2m)
PASSAGE
Amul is the first choice of so many ice cream lovers in India among the top ice cream brand category. Amul brand, owned by Gujarat Co-operative Milk Marketing Federation, was established in 1946 in Anand, Gujarat.
The second on the list of top ice cream brands in India is Vadilal.
Cornetto and Magnum are one of the top ice cream brands in India owned by Hindustan Unilever. Mother Dairy is a very strong name in the Indian ice cream industry. This company is very similar to Amul, in terms of the products, they manufacture and sell. Another big player in the ice cream industry is Havmor. Havmor Company has been able to stand strong as one of the big fighters in the battle of top ice cream brands in India for very long. Ice cream market also has local and less popular brands apart from the top brands.
Amul was (and still is) in the Guinness record for running the longest- ever advertising campaign. The advertising strategy of Amul through digital marketing made the most of it through platforms such as Facebook, Twitter, Instagram, and others.
- Identify the most important feature of the ice cream market (1 marks)
- Identify the type of cost incurred by firms on advertising campaigns and strategies. (1 marks)
- Express your personal opinion about the ice cream market based on the above information (2 marks)
Explain the concept of perfect competition and price determination under perfect competition
What are the features of a market?
What is meant by Spot Market?
What is meant by Spot Market?
What is meant by Commodity Market?
Explain the types of the market on the basis of time.
How the market can be classified?
How the market can be classified on the basis of Economics?
Give economic terms:
The period in which all factors of production are variable.
Assertion and reasoning question:
- Assertion (A): With a rising price, the supply of a commodity falls.
- Reasoning(R): Seller earns more profit at a higher price.
Find the odd word out:
Classification of markets on the basis of time:
Give an economic term:
Period in which supply is fixed and so the price is determined by demand only.
Homogeneous product is a feature of this market.
- Monopoly
- Monopolistic competition
- Perfect competition
- Oligopoly
