Monopoly Industry and its Economic Effect.
We live in a world where different economic systems exist and its existence is can create balances or imbalances in the economical arena. These economic system can be characterized as Laissez-faire economy, command economy and a mixed economy, implemented by each state. Within those segments of economy, a country can have companies following different structures of industries in the marketplace with distinctive levels of competitions.
To understand how fluid a country 's economy can be, it would be wise to understand a bit more about the types of industries involved here. An industry can be described in four types; Pure competition, monopoly, monopolistic competition and oligopoly.
In the Pure
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Last, but not least industry is the monopoly industry and this is the industry we will dig further in this discussion.
Since monopolistic competition or oligopolistic market structures are the most commons in the United States, it would be very interesting to actually analyse more of the monopolistic structure industry and how that impacts the economy overall. In order to understand more about the monopolistic industry is important to understand the fundamental of this industry.
In the monopolist industry only one seller sells a products and take over the control of those products. In this industry there is no close substitutes. Its also important to understand that in order for that to happen this firms are given exclusive protection of production by the government. Not just by the government, but these firms can acquire their monopoly through a smart and efficient free market production and with economies of scale.
To better have a picture of a monopoly industry, why not given examples of one major monopoly industry in the world, the Microsoft. Not sure if there is familiar to this product, but if anyone wants to buy its software, windows is the only choice since they are the only ones who provides it. So whether we like windows or not, if there is need for a computer that 's the only one we can buy. Another example, nationally recognized is the U.S postal service, where there is no competition and it’s protected by the government. Whether
The following case study is in regards of economic market structure. In the world of economics all businesses or companies rather, are categorized in certain market structures such as monopoly, oligopoly, or perfect competition, for instance, the market structure for restaurants. Most restaurants are considered monopolistic competition. Being that they all sell and serve food. They have to have instances that vary such as price, logos, servers, locations, décor, types of food, and hospitality.
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 monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and
All of the above industries have their relations with the consumers of the world, as well as the competition in the same industry. The world is changing every day with new ideas every day all industries.
There are only a few firms that make up this industry and they have control over the price. These companies have high barriers to entry the market. The products they produce are similar which cause competition. There is both good and bad when it comes to oligopoly and monopolies. Some good things about oligopoly are by developing product innovations and taking advantage of economies of scale. With oligopoly it is more likely to expand production capabilities, promote economic growth, and they develop change that advances the level of technology ("Oligopoly," 2000). Some bad things about oligopoly is that they tend to be inefficient in the allocation of resources and promotes the concentration of income and wealth ("Oligopoly," 2000). They charge much higher prices and end up producing less of an output than the efficiency benchmark of perfect competition. One of the good forms is natural monopoly. Natural monopoly exists when economies of scale encourage production by a single producer (Mayer). An example of this is your local electrical utility. As a power plant increases, the cost per kilowatt hour of electricity falls (Mayer). If we were to all use small generators to run our homes the cost of each household would be ridiculous. The total fixed cost of generators for the community would be high and the variable cost of running it would also be high. Another form of monopoly that is good is
Oligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.
There are many models of market structure in the field of economics. They include perfect competition on one end, monopoly on the other end, and competitive monopoly and oligopoly somewhere in the middle. In this paper, we will focus on the oligopoly structure because it is one of the strongest influences in the United States market. Although oligopolies can also be global, we will focus strictly on the United States here. We will define oligopoly, give key characteristics important to the oligopoly structure, explain why oligopolies form, then give an example of an oligopoly in today’s economy. Finally, we will discuss the benefits and costs in this type of market structure.
In a monopolistically competitive industry, the goods sold, while not perfect substitutes, can be viewed as acceptable substitutes by most people. As a result, if Firm A raised the price of its good substantially, consumers would decrease the quantity demanded from Firm A and would move to other firms selling similar products. As a result, Firm A would sell few units at the new higher price. As the quantity a firm sells falls, so does its percentage of sales in the industry, also
1 - There is a separation of service and payment. Because monopolies are funded through taxation, they cannot go bankrupt - they can always get more funding from the public coffers. Therefore, monopolies have little incentive to be efficient.
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.
I am not in the workforce right now but one industry that I believe effect almost all of the human population to some degree is the food industry. The one organization that probably has the most control over the food supply of America and the world Monsanto. An analysis of their business practice proves that they operate as a monopoly. A low degree of government intervention will be bad for the consumer because that will allow Monsanto to create an abundant amount of genetically modified seeds, corn, and other products. Personally, I want to buy and purchase foods that come from Mother Nature, not a lab. A monopoly refers to a market structure where a single firm controls the entire market. In this scenario, the firm has the highest level
•Oligopoly: This is an industry with very little firms in the market. If they conspire, they weaken output and raise profits the way a monopoly would and should do. For example the mobile phone industry is an oligopoly what with so many companies for example Apple, LG and Samsung all competing together. Supermarkets are oligopoly’s as they make supernormal profits as well.
Has the economy ever thought about direct impact from monopoly and oligopoly industries? The structure of a monopoly based industry exemplifies one seller in the entire market. On the other hand, the concept of an oligopoly industry illustrates few sellers that have the potential of making a direct impact in one single industry idea. The economy has depended on the market share of a monopoly and an oligopoly trade. However, a monopoly industry differs from an oligopoly industry due to a monopoly competitor dominates a majority of the market share of many industries and an oligopoly competitor contains few sellers who dominate a market share based on one single industry idea.
Competition failure or monopoly may result from natural monopoly where it costs incurred in production becomes lower when only one firm is involved in production than several firms producing the same output. In a monopolist market under-production, higher prices become dominant contributing to market inefficiency. Winston cites cases of misuse of monopoly power can lead to market failures and sometimes may lead to acute shortage of essential commodities (130).