Perfect Competition and Monopoly

A monopoly is advantageous to the society and is encourages by the government if there are high fixed costs and very strong economies of scale. At the same time, it could also lead to unequal distribution of wealth; containment of consumer choice; lobbying and unethical spending.

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

21) Suppose that an industry is characterized by a few firms and price leadership. We would expect that:

A. perfect competition and monopolistic competition B. duopoly and imperfect competition C. duopoly and triopoly D. monopolistic competition and oligopoly

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.

The video discusses the four types of markets: perfect competition, monopolistic competition, oligopoly, and monopoly. These different markets are all over & were established for the selling goods to consumers. Currently some of these markets might not be used anymore. By reviewing these markets will give you a better comprehension of each one.

A monopoly is exclusive possession or control of the supply or trade in a commodity or service and in an economy this form of power can create a decline in the welfare of the consumer. The government may seek to regulate monopolies as a way to protect the interests of the consumer and use regulations as a way to limit price increases. These regulations are intended to reduce the practices of unfair business because monopolies have the ability to charge unreasonable high prices for the goods and services proving detrimental to consumers.

In a monopolistic market, there is more control over pricing that in a monopoly. If they raise their prices, they will only lose a small amount of customers. A monopoly is a large enough business to influence its own price, such that it is the price setter rather than taker, unlike a perfectly competitive market where each firm

Monopoly is a single firm that controls the market of a given product. In a monopoly there is an absence of competition, which results in high prices and inferior products. Because there is an absence of competition and the firm has total domination of the market, the demand curve in the entire market for the good is equal to the demand for the individual firm’s output. A key characteristic of a monopoly is the individual’s firm downward sloping demand that shows that the firm has some market power. Market power is the ability to control price without losing market share. A monopoly’s profit maximization is achieved when marginal cost equals marginal revenue.

What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.

A competitive market consists of many buyers and sellers. Markets thrive because an equilibrium price is established through natural competition and no single buyer or seller can affect that price. Instead both buyer and seller must take the price given by the market based on the dynamics of

Perfect competition referred as “pure competition,” it’s a type of market structure where there are many buyers and sellers. As a result, if the price of the good or the service is too high or the quality did not meet their expectation, they would have many substitutes. Fontinelle stated that this kind of market structure has to meet 5 criteria; sell similar products making the consumer has more choices, product price could not be controlled by the companies, have small market share, each company would provide information about the product that they are selling and the price that is going to be charged for the buyers, and freedom of entry and exit should be the characterization of the industry (Fontinelle).

Unlike competitive markets consisted of a large number of producers which compete with one another to satisfy consumer’s needs and have no influence on price, monopolistic markets are made up of only one producer who is able to control prices in the market. Stager (1992) notes it is the case of a pure monopoly which appears when a commodity is produced by only one producer and it does not have any close substitutes (cited in Manesh and Karimani, 2017). Evidently, in the absence of alternative products, the producer does not compete with others. He furthermore states this tendency happens rarely in real world since majority of commodities could be replaced by other raw materials. It is, therefore, considered the definition of monopoly relies

Perfect Competition is a theory of market structure based on four assumptions: there are many sellers and buyers, sellers sell a homogeneous good, buyers and sellers have all relevant information, entry into or exit from the market is easy (Arnold.214).This market structure is relatively easy to enter and exit which is convenient for anyone who wants to own a company. A perfectively competitive firm is a price taker, which is a seller that cannot control the prices of the product they sell. “There is no government interference in the market in the form of taxes, subsidies, rationing of essential goods etc.”(Dutta.63) Consumers have many substitutes if the products they want to buy become too expensive or its quality is poor. For markets to have incentives for substitute for the products will be easy because consumers will be willing to buy as long as the rules apply. (Berta, Julien, tripcou. 2012) It

As we can see from the above that monopoly has both advantages and disadvantages. However a majority of the governments, as well as consumers and around the world, do not prefer pure monopoly market structure because most of the times it leads to exploitation of consumers by the monopolist.