Monopolistic And Oligopoly: The Four Types Of Market

For my research paper I decided to write about monopolies. I chose to write about monopolies because I wanted to learn more about them. No this type of monopoly is not a board game in which consumers engage in buying houses or property with fake money. Instead this type of monopoly is a firm that is the only seller of a good or service that does not have a close substitute. An example of a monopoly is natural gas company or Time Warner Cable or Microsoft and its Windows operating system. Although few people like monopolies and even though few companies are monopolies, the model of a monopoly can be useful. You see a monopoly is useful in analyzing situations in which firms agree to act together as if they were a monopoly. Monopolies are not illegal in the United States. What is illegal is actions taken by monopolies to limit competition. But there are times when one supplier in a market is better than a competitive market? Should the government work to protect that one supplier in a market?

Oligopolistic markets, such as supermarkets or car manufacturing, can be defined in terms of market structure or in terms of market conduct.

Monopolies are defined as an industry dominated by one corporation, or business, like standard oil. They are a main driver of inequality, as profits concentrate more on wealth in the hands of the few.(Atlantic). A monopoly has total or nearly all control of that industry. They are considered an extreme result of the U.S. free market capitalism. The business own everything, from the goods to the supplies to the infrastructure. This company will become big enough to buy out other competitors or even crush their competitor by lowering their prices to get the other business to go out of business. They will then control the whole industry without any restarted, having the prices be what they want and the product to be in what condition they want

A flawlessly competitive market has several different representatives selling the exact same products. These representatives are considered to be price takers in reference to the competition. Price takers are firms that have no market power. They simply have to take the market price as given (Lumen, 2017). A monopoly starts when a single company sells a product that cannot be reproduced. Microsoft is a perfect example of a company that is seen as a monopoly due to its control of the operating systems market.

In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices.[4] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[5]

e.   Firms that are price makers…/a monopoly is a price maker as it holds a large amount of power over the price it charges.

Since a monopoly is the only seller of a good in the market, the demand curve is the market demand curve. Therefore a monopoly has a downward sloping demand curve, in contrast to the horizontal sloping demand curve of a firm in a competitive market (Mankiw, 2014). Monopolies aim to find the profit-maximizing price for its product. If a firm is initially producing at a low level of output, marginal revenue exceeds marginal costs (Mankiw, 2014). Every time production increases by one unit, the marginal revenue increases again and is greater than marginal costs (Mankiw, 2014). Therefore

By definition a Monopoly is exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices (Monopoly 2012). Individuals are often time fearful of a company or industry becoming a monopoly because it would control too much of a market share, and do whatever wants; this includes raising prices, to using excess capital to branch into even more areas (Rise of monopolies 1996). The market structure of a monopoly is characterized by; a single seller; a unique product; and impossible entry into the market (Tucker 2011). A monopoly can be a difficult thing to accomplish being that a single seller faces an entire industry demand curve due to the fact it makes up the industry as a

There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for

Monopoly is a firm that is the sole seller of a product without close substitutes. A monopoly is caused by barriers to entry which means that there is only one seller in the market and no other firm can enter or compete with that sole seller. There are three main sources to barrier to entry, monopoly resources: a key resource required for production is owned by a single firm. Government regulation, which is the government gives a single firm the exclusive right to produce some good or service. Also the production process, which is a single firm can produce output at a lower cost than a large number of firms.

Competition within the industry as well as market supply and demand conditions set the price of products sold.

The organization and characteristics of a specific market where a company operates is referred to as market structure. While markets can basically be classified by their degree of competitiveness and pricing, there are four types of markets i.e. perfect competition, monopolistic competition, monopoly, and oligopoly. In perfect competition markets, many firms are price takers whereas monopolistic competition markets are characterized by the ability of some firms to have market power. In contrast, oligopoly markets are those in which few firms can be price makers while monopoly market is where one firm can be a price maker.

A monopoly market is defined as a market in which a single seller, selling a distinct product faces no competition; therefore, making the seller the sole seller of the good without any close substitutes (The Economic Times, 2017). Monopoly markets results in market power, in which the single seller has substantial influence on the market price. The outcome of one seller gaining market power often negatively impacts the economy as a whole. Moreover, when monopolies occur the government interferes for the sake of the economy. Over the years, the United States has faced numerous monopolies, and the government has had to create policies to ensure the protection of markets.

In the opinion of Baumol and Blinder (2011, p. 235), "monopolistic competition is a market structure characterized by many small firms selling somewhat different products." The authors in this case further note that the output of each entity is small in comparison to the market's aggregate output of competing but closely related products. With that in mind, the mobile phone market exhibits some key characteristics of monopolistic competition. In this market, customers in need of mobile phones are presented with a wide range of options to choose from. For instance, a customer who enters a mobile phone handset shop has the option of purchasing a Motorola, Nokia, Samsung, Blackberry or even an LG handset. All these products despite being closely related are also largely differentiated. As Tucker (2010, p. 268) notes, "the key feature of

•Monopolistic competition- When an industry contains many rival firms, each of which has a comparable but at least slightly different product. Restaurants, are an example, all serve food but of different types of food and in different sites. Manufacture costs are above what could be attained if firms sold equal products, but consumers have an advantage from the variety.