Advantages And Disadvantages Of A Monopoly As A Market Form

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INTRODUCTION This article is about monopoly as a market form. It tells us about a monopoly that exists in the United States of America. It is called Comcast Corporation; it is America’s biggest cable company, internet-service provider and third biggest home telephone provider. Universally, it is the largest media company in the world. This company is a major monopoly in the cable services industry in America and now it’s C.E.O. Brian Roberts wishes to expand it even further by buying the second biggest cable in America, Time Warner Cable. Now, the concern portrayed by the author is a fairly economic one, he says that costs of broadband internet, cable television and home phones in the country are very high as compared to the services provided…show more content…
These barriers are of majorly three types:- 1. Economic barriers: This includes economies of scale, capital requirements, cost advantages and technological superiority. A characteristic of a monopoly is that it has decreasing costs for a relatively large range of production. This characteristic coupled with large initial costs or costs incurred while starting up the business or firm gives monopolies an advantage over would-be or future competitors. A monopoly is required can reduced the price of its products below the prices of a new firm’s operating costs and thus by doing so it renders the new firm incapable to continue its operation. • Capital requirements: The production processes and necessities usually require large investments of capital, or large research and development costs or substantial sunk costs, this reduces or limits the number of companies or firms from entering or venturing into a new industry. Small companies also find it difficult to enter into an industry and expand due to the large fixed costs that…show more content…
COMPETITIVE MARKETS The cost functions in both monopoly and perfectly competitive markets are the same, companies and firms in both the market structures minimize cost and maximise profit, the shutdown decisions in both the market forms are the same. Even though there are a few similarities between monopoly and perfectly competitive markets, there are some distinctions: • Marginal revenue and price: In perfectly competitive markets, price is equal to marginal cost. In a monopoly, price is set above marginal cost. • Product differentiation: The products in perfectly competitive markets are homogenous, there is zero product differentiation and every product is a close substitute of the other. However, in a monopoly there is no product differentiation because there are no available substitutes for monopolized goods in the market. The monopolist is the sole producer of the good. A consumer has to either purchase the monopolized commodity or has to stop using that product, there is no alternative available. • Number of competitors: perfectly competitive markets are filled with an infinite numbers of producers and consumers. Monopoly involves only a single producer or
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