00:03
Hello, here we have 10 different questions and let's start with the first one.
00:12
So question number one, name three characteristics of a monopoly firm.
00:23
So three main characteristics of monopoly are first.
00:30
First, it's a single firm selling all output in this market.
00:41
So single firm.
00:49
There is only one firm in this market.
00:54
This monopolist is the only one firm in the market.
01:00
The second characteristic is this company sells a unique.
01:06
Product unique product and the third characteristics is restrictions on entry into and exit out of the industry so since there are some restrictions new companies cannot enter this market let me write like entry restrictions restrictions.
01:58
Okay, there is only one firm which sells its unique product and it's only one because there are some entry restrictions to this market.
02:11
Okay, this was the first question.
02:15
Now the question number two.
02:19
Give an example of a business that is considered a monopoly.
02:24
And let's look to the real life.
02:29
For example, you can look down at your, i don't know, pants, for example.
02:36
So see the zipper? so if you look to the pants zipper, what do you see? chances are that it says y, k, k.
02:58
That stands for yoshida kogyo kabushiki kaisha or ykkk, which is a company that makes nearly all of the world's zippers.
03:15
And this company, ykk, is a perfect example of a monopoly, which means it's only one seller in the market.
03:29
Okay, ykk might be a good example of a company that is a monopolies.
03:37
This was the second question.
03:42
Now we are going to the third question and now let me erase the screen because we need to use we have more questions.
03:58
We don't need this information anymore and now let's go to the third question.
04:08
Give me a second please.
04:13
Yeah, now i'm ready for the next question.
04:16
Question number three.
04:20
How does a monopoly firm or any other business decide the quantity that should be produced to maximize profit? so let's look to the graph for simplicity.
04:41
We have price we have quantity it's our usual graph and there are two main several main curves this might be demand this oops sorry this is marginal revenue curve also we have increasing marginal cost curve this is marginal cost and the rule is the monopolies as any other company or is as any other seller follows the rational rule for sellers and the rational rule for sellers says to keep producing until marginal cost equals marginal revenue so we need to find the intersection of marginal cost and marginal revenue and it's here.
06:02
Now we look down to see the quantity.
06:05
This is the optimal or profit maximizing quantity.
06:11
This is step one.
06:14
That's how monopolists decide what is the quantity.
06:20
And step two is what price should this monopolist, church.
06:26
Now we look up to the firm's demand curve.
06:33
So we look up from this quantity.
06:36
We're going up until this demand curve.
06:42
We're doing this to find the highest price we can set and still sell this quantity.
06:51
So that's how we can find the profit maximum price.
07:01
So these are two steps and this monopolies follows the rational rule for sellers marginal cost should be equal marginal revenue.
07:19
So that's how we can find the profit maximizing quantity and price.
07:32
Okay, now we can go to the next part, part four, and again we will need again some graphs so i can erase all this stuff.
07:52
We don't need this.
07:58
In this question, in the question four, it's given that this company has a profit.
08:08
All right? so it's a monopoly which had some profit.
08:19
So we need to draw the monopoly cost curves where this company makes profit.
08:29
So let me, this is the demand curve.
08:36
And now it's important to have the average total cost curve.
08:41
Well, something like this.
08:46
This is average total cost curve.
08:55
And somewhere here, the quantity.
09:05
This is the price.
09:10
And this is the average total cost per one unit.
09:19
And this is the profit maximum.
09:21
Quantity and we need to shade the area of profit and this area is here and let me fix this this question is number four question number four so this rectangle this red rectangle given this quantity is a difference between price and average total cost.
09:57
This is the area of profit.
10:04
Question number five.
10:10
For this question we don't need the graph.
10:15
So let me write it here.
10:18
The question is if the monopoly firm is making a profit, will other firms join the market like they did in perfect competition and eliminate the profits of the monopoly.
10:34
And the answer is no.
10:38
They simply cannot enter.
10:43
They can't.
10:47
Of course they would like to enter because this market is profitable and it's very attractive for other companies, but they cannot do that.
10:56
Because of, as i already mentioned, entry restrictions there are different entry restrictions like patents for example there are many different barriers to entry some of them are demand side barriers some of them supply side some of them government policy like patents or any other shape regulations.
11:42
So for different reasons, new firms cannot enter this market.
11:50
Okay, this was the question number five and now we are going to question number six.
11:59
Again, we will need to draw some graphs.
12:08
Let me erase.
12:09
Erase and here we have the opposite situation now we have the company the monopolist which has negative profit or loss so let's look what will be in this case let me erase everything let me erase average total cost we don't need this any more so again we are doing the same approach so we compare the price with the average total cost curve let's say we have demand and we have average total cost curve and at some profit maximizing quantity like this for example this is the average total cost curve sorry it's the average total cost and this is the price and now as you can see average total cost is greater than the price so this company has a negative profit or loss and this blue rectangle is the area of this loss.
13:58
And again, let me change this.
14:00
This is number, the question number six.
14:07
So this blue area, blue rectangle is the area of the loss.
14:14
Because the price is lower, as you can see in this graph, price is below...