Pure Monopoly in a Competitive World Essay

996 Words 4 Pages
In the business world, the perfectly competitive firm is considered the price taker, whereas the monopolistic firm is the price maker, meaning they have control over the price. Pure monopoly does exist in today’s business world; we all have had the opportunity to have personal dealings with such companies. This assignment will discuss the various degrees of “monopolies” and attempt to provide accurate examples, allowing me to share my understanding of the competitive business market. In a competitive business world, pure monopoly exists when a single firm is the exclusive producer of a product or service for which no close substitutes exist. There are three very distinct characteristics that can be used to describe a pure monopoly or …show more content…
For this reason, a pure monopolistic company is not so intent on selling the most expensive product, but instead places their intent on maximizing their profits ().
To some extent, the pure monopolistic firm varies from just a monopolistic firm partly because of the number of competitors involved in a monopolistic venue which is less than one hundred. A monopolistic firm can be defined as a firm that has a relatively large number of firms, differentiated products which is promoted with heavy advertising, and easy entry/exit from the industry itself ().
Monopolistic competition consists of small market shares, meaning a firm has a relatively small percentage of the total market and limited control over the market price. Because of the fairly large number of firms involved confirms that no collusion by a certain group of firms can happen so there can be no restrictions on output of the products and a set price is improbable and the involvement of several firms, each firm controls their own pricing without facing retribution from the other firms (). This is quite a stark difference between pure monopolistic firms being that pure monopolistic firms control the price and face no competition whatsoever in terms of products.
Utility companies are considered to be pure monopolistic in nature. Here in south-central WV, American Electric Power (AEP) is the sole provider of electricity; therefore they would be considered pure