Are Monopolies Necessarily Less Efficient Than Perfect Competition

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

being able to purchase a desired product at lower per-unit costs. To provide an example of

equilibrium. The new company is now run as a monopoly, and this paper shall explain

Many companies and people have committed monopolies before they were illegal and even after it. A monopoly is when one person has complete control over a company and makes close to 100% of the profits but because of the The Sherman Antitrust Act passed on April 8, 1890, “combination in the form of trust and otherwise, conspiracy in restraint of trade.” In simple terms the act prohibited any forms of monopoly in business and marketing fields. Monopolies committed before the Act, making it legal in every way but unethical, by some of the famously known marketers like John D. Rockefeller making him filthy rich. While others committed after The Sherman Antitrust Act caused a company like Microsoft to be sued and have a bruised ego.

Monopoly isn’t just a board game where players move around the board buying, trading and developing properties, collecting rent, with the goal to drive their opponents into bankruptcy. However, the game Monopoly was designed to demonstrate an economy that rewards wealth creation and the domination of a market by a single entity. Monopoly and Oligopoly are economic conditions where monopoly is the dominance of one seller in the market and an oligopoly is a number of large firms that dominate in the same industry. Even though monopoly and oligopoly coexist in the same market, they do have some differences. In many cases, monopolies arise because the government has given one person or firm the exclusive right to sell some good or service. Since monopolistic markets are controlled by one seller, the seller has the power to set prices too high amounts. Monopoly companies give consumers limited choices on what to pay and what to choose from what is supplied. Oligopoly is consumer friendly because it promotes competition amongst sellers with moderate prices and numerous choices in products. Examples of oligopoly area wireless carriers, beer companies, and different types of media like TV, broadcasting, book publishing and movies. This essay will discuss descriptive section on how monopolies and oligopoly apply to microeconomics; it’s historical backstory, the government involvement with handling monopolies and oligopoly, how it applies to college life and the overall importance to

Perfect competition is an idealised market structure theory used in economics to show the market under a high degree of competition given certain conditions. This essay aims to outline the assumptions and distinctive features that form the perfectly competitive model and how this model can be used to explain short term and long term behaviour of a perfectly competitive firm aiming to maximise profits and the implications of enhancing these profits further.

Efficiency is important to producers, consumers, and society as a whole because the resources are scarce. The people have to decide to use the resources to increase its benefits. When a resource are used to produce goods and services it make it hard to use for another goods and services. So the best way to understand economy is to allocation resource is to produce more goods. In this type of economy production possibilities frontier (PPF) graph can be shown of the production of two goods. Producers could lose money if they produce a good and the demand of the produce is low because less people are going to buy the product. This effect consumer by how high and low the demand is. If the demand is high then the price of the goods is low. If the demand is low then the price of the goods is high.

This paper will explore several economic concepts, and its benefits within the capitalistic market system. The main objectives are: how to increase revenue, how to achieve ideal production levels, how to determine fixed variable costs to maximize profits, and how to identify methods to reduce costs. The sole proprietor will operate in a pure monopoly market structure, which is characterized by his unique patented technology. Therefore, as a price-maker controlling the market, with apparent economies of scale, he must quickly identify the production level that gives the greatest vertical distance between the total revenue and total cost curves. More to the point, the company’s quantity of output that equates marginal revenue and

(McTaggart 2010) The point on the PPF at which goods and services are produced in the quantities which provide the greatest possible benefit .Hence, when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit, we achieved allocative efficiency. Hence, we must measure and compare costs and benefits.

n perfectly competitive industries, there are such a large number of firms, each producing such a small proportion of the industry’s output, each firm cannot, by its own independent action, affect the supply or the price. The degree to which firms can influence the price of their product through their own strategy depends upon market structure. Perfectly competitive market structure is a market situation where there arelarge number firms producing a homogeneous productand there are large numbers of byers demanding the same products. In such a market every firm considers that it can sell any amount of output at the prevailing market price.Similarly, there is no restriction for the byers to purchase any amount from the

Competition stays greater when there are more films operating at the same level. The constant but not perfect competition in an oligopoly leads to a semi-favorable outcome for the consumers, as prices are kept lower than a monopoly, but not as low as in perfect competition. A perfect competition exists when no one company, is strong enough on its own to set it’s own terms and conditions on the market. In an oligopoly, the main players have an incentive to collude and keep prices higher as high prices translate to higher revenue for all the

Thus, when a manufacturer chooses monopolistic behaviour, the price of a product is higher and the quantity will be lower than in the competitive market. Following this, the output is set to be Pareto inefficient as there are a vast number of consumers willing to purchase a product at prices between marginal cost and price set by the monopolist (ibid.). This indicates there is a room for Pareto improvement, in other words, we can make both sides of the market better off without making anyone worse off. Varian (2014) explains this inefficiency by giving another distinctive feature of the monopolist’s behaviour – the producer in monopolistic market has to keep an eye on expanding output’s influence on the revenue coming from inframarginal units. The reason is it makes the monopolist sell current products at lower price than usual. If there was not increasing output’s effect on the price of other inframarginal units, the monopolist would sell extra units of a product at discounted prices

Allocative efficiency is where a market only produces the goods and services that are the highest in demand and are the ‘want’ of society. It is achieved by a perfectly competitive market when the marginal benefit of a good or service is equal to its marginal cost. Productive efficiency is where a firm produces their product at the lowest average total cost possible. This is achieved in a perfectly competitive market when the equilibrium output is produced at the lowest minimum cost. The difference between the two is that productive efficiency means producing an item without waste and allocative efficiency means producing an item where profit is equal to its marginal cost.

The concept of monopoly relates to a situation where a large part of the market if not all, is controlled by one company or group of companies. Monopoly identifies with the market share ownership where one organization supplies a given product to the market in the absence of alternative or substitute suppliers (Trageks, 2010). The case scenario in this study presents a monopolistic market situation. The fact that Futures Unlimited Corporation is the single license owner approved to distribute and control plutonium presents a monopolistic situation. Monopolistic markets post different results on organizations depending on the company 's management decisions. Although many monopolies employ the single price strategy in ensuring the maximization of profits, the effectiveness of this model posits a question of fact. A single priced monopoly indicates that elasticity in demand affects a single price monopoly in such a way that increased prices lead to decreased consumption of the commodities. In this scenario, the monopolistic situation leads to the reduction of revenue as well as profits. A monopolistic organization will only make profits in the situation where marginal revenues exceed marginal costs. In the event a monopolistic market increases production where revenue equals costs, the company experiences decreased revenues as well as profitability. A single priced monopoly likely has a reducing effect on the company 's profitability with an extra output. However, the

Because product is produced for the minimum ATC possible, a competitive market achieves productive efficiency. Additionally, because the product is sold at the lowest possible price, competition also achieves allocative efficiency, since the lower price not only allows the greatest number of consumers to enjoy the product, but it also maximizes consumer