MARKET STRUCTURE

CONTENT

1. Review of Cost and Revenue Curves
2. Price and Quantity Determination Under Perfect Competition
3. Price and Quantity Determination under Monopoly
4. Price Discrimination
5. Causes of Monopoly
6. Advantages and Disadvantages of Monopoly
7. Control of Monopoly

Review of Cost and Revenue Curves

The Concept of Cost

Costs are expenses incurred during production. We shall examine the following types of cost incurred during process of production.

Total Cost

This is made up of total fixed cost and total variable cost, i.e.  TC = TFC + TVC, where TFC is total fixed cost and TVC is total variable cost

Total Fixed Cost

These are the costs that do not change with the level of production.  They remain constant whether the firm is working at full capacity or not. Examples are rent, purchase of equipment and machinery, top management salary.  These expenses are usually fixed in the short run.

Mathematically, TFC =  TC – TVC

Total Variable Cost

These are expenses that vary as output increases or decreases.