In many capitalist economies, the production of goods and services is controlled by the few who are able to produce the goods with minimal of without any competition. Such an economy is controlled by a few individuals who are able to produce or have been protected by the legistation. Such people who are able to produce goods for production are referred to as the monopolists. Monopoly in the marketplace indicates the existence of a sole seller. This may take the form of a unified business, organization, or it may be an association of separately controlled firms, which combine, or act together, for the purposes of marketing their products (e.g. they may charge common prices). The main point is that buyers are facing a single seller. These monopolistic powers are created from; exclusive ownership and control of factors inputs, patents rights, natural monopoly, which results from minimum average cost of production. That is, the form could produce at the least cost possible and supply the market and finally, market franchise. A monopolist, being the sole (producer and) supplier of the commodity is a price maker rather than a price-taker as the price and quantity he will sell will be determined by the level of demand at that price and if he decided on the quantity to sell, the price he will charge, will be determined by the level of demand. The monopolist, because he is the sole seller faces a market demand curve which is downward sloping.
All firms are assumed to aim at maximizing profits or minimizing losses. The monopolist controls his output or price, but not both. The monopoly maximizes profits where: MR = MC (the necessary condition of profit maximization). In the monopolist's market, Producers agree to supply only to recognized dealers, normally only one dealer in each area, on condition that the dealer does not stock the products of any producer outside the group (or trade association). Should the dealer break the agreement, all members of the group agree to withhold supplies from the offender? This practice has proved very effective restriction on competition for it ensures that any new firms would find it extremely difficult to secure market outlets for their products. The monopolistic market is also characterized by the creation of barriers to ensure that there is no competition against them. E.g price undercutting, individual ensures AN actual text printed collective boycott and exclusive holding of patent rights. A monopolistic firm may dictate to wholesalers and retailers the price at which its products would be sold. This is another way of ensuring that other firms are not attracted into the industry if such firms can sell their products at more competitive prices. Perhaps the most notorious practice for which monopolists are known is that of exploiting consumers by overcharging their products. There are three ways in which the monopolist can overcharge his products; The price charged by the monopolists in order to maximize his profits is higher than would be the case if a competitive firm was also maximizing its profits because in the case of a monopolist, supply cannot exceed what he has produced, A cartel is a selling syndicate of producers of a particular product whose aim is to restrict output so that they can overcharge for the product. Thus, they collectively act as a monopoly and each producer is given his quota of output to produce,
Although monopolies are usually hated mainly because their practice of consumer exploitation, there are some aspects of monopolies which are favorable. The following arguments can be put forward in favor of monopolies; As it has the whole market to itself, the monopolistic firm will grow to large size and exploit economies of large scale production. Hence its product is likely to be of higher quantity than the product of a competitive firm that has fewer changes of expanding and lowering of the long run average cost (LRAC) of the firm. The price charged by the monopolistic firm may not be as high as is usually assumed to be the case.
In this project, we are interested with the graphical representation of the production function and the demand function. We will also be interested in a presentation of the cost function c verses the quantity q from 0 to 5000. In this project, we are will also plot the demand quantity function and the price p and present this graphically. We are also interested in the development of the revenue function from the information of demand quantity and the cost function provided. And finally we will plot the revenue function with respect to the price of the commodity and the quantity demanded.
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