Characteristics of Monopoly
Monopoly refers to there is no competition and therefore the supplier has a high amount of pricing power. In addition, monopoly also is a situation when a single corporation or group owns all or practically each of the market for a given type of product or service. Besides, in addition, it contains several characteristic, case in point and diagram in monopoly market.
In addition, there will be four common types in competition no cost market which is ideal competition, monopolistic competition, oligopoly and monopoly. There are different meaning, features and illustrations in these four prevalent types in market.
A monopoly is certainly when there are many buyers but there is only one vendor that controls the way to obtain a product and its own price. This enables the distributor to charge higher prices than if there is competition. Burkett, John P. (n.d, pg345) states that if something does not have any close substitutes and a single seller, economists declare that its market is a monopoly and its own seller is a monopolist. Monopoly is like a market structure in which one company sells a special goods into which access is blocked where the single company has extensive control over the product price. So, consumers haven’t any choice to buy their product and service. There is few federal essay editing service government agencies keep carefully the formation of monopoly under control, especially in markets such as for example cable businesses like Tenaga National and press.
2.1Characteristics of Monopoly
Monopoly market framework is selling the product without any close substitutes with others. The qualities of a monopoly market are as follow:
There is merely one seller in a monopoly industry. Owner controls the supply of a product and decides the product value. Besides, a monopolistic likewise control over the entire market because there is a single particular services in the market obtain a lot of purchasers
2.1.2 Unique Item without close substitutes
In a monopoly marketplace, their product and assistance are special and exclusive. They have their private idea and design for the merchandise and service. All the units of a product are very similar and there happen to be no option to that commodity in the company. The firm are controlling over the marketplace by offering a product that is not same with additional. The firm might use specialized details like trademark and copyright to be able to establish legal authority over the development of some products and services.
2.1.3 Barriers to Entry
Normally, monopoly problem in market can continue only once other company does not enter into the industry. In a monopoly marketplace, they haven’t any others competitor because barriers of enter are very strong. It could be prevent and discourage to go into this market to be a competitor. Therefore, a monopoly presents barriers to prevent potential competition from entering the market. The barriers could even be legal in that the company to take good thing about copyrights, tariffs and trade limitations and others. If want continue the monopoly industry should not be no entry for fresh firms.
2.1.4 Profit in the Long Run
The seller can earn more revenue as he can when there is no any fear of competitive vendor in the monopoly market. In other palm, if the seller gets unusual profits in the long term, he cannot be simply quit from this market. However, that is impossible under perfect competition. If unusual gains can be found to a competitive firm, other companies will enter your competition with the result unusual gains will be eliminated.
2.1.5 Insufficient Competition
When the market need to serve like a monopoly, having less business competition will be the best benefit for the monopolistic. They also need to barriers to entry for ensure other companies not easily can be found in the marketplace running their business. For instance, cable companies will be the monopoly in industry. They control all of the supply of the merchandise and a lot of buyers.
2.2 Diagram of Monopoly
Since there is only one producer in monopoly, the business’s demand curve represents the sector demand curve. The demand curve for a monopoly company is downward sloping, which shows the average revenue or price for each unit of end result sold. Marginal income is additional altogether revenue from selling one more unit. Total revenue may be the prices multiply with amounts. The graph shows a linear demand curve and MR curve.
For example, if the quantity ranges from 0 to 5 units of cable TV, the MR is positive (MR>0) and demand is elastic where cost decrease will raise the TR. At the quantity of 5 units of cable TV would bring about negative MR (MR<0) which range the demand is inelastic because drop in cost would decrease the TR. TR is maximized when MR is certainly zero.
2.3 Conclusion of Monopoly
In conclusion, monopoly is only a seller but many buyers in a market. A monopolist is advertising unique product and the look and idea create by his individual. The seller is normally ‘price maker’, he made a decision to set the product price and maximize the income. Therefore, monopoly is an absence of competition, which often results in high prices. Besides, a monopolistic must also control some provider no access in monopoly market because some firms are strong to take positive aspects in your company.
3.0 Best Competition, Monopolistic Competition, Oligopoly and Monopoly
Perfect competition ensures that includes a market situation in which a lot of sellers or producers producing and selling homogeneous merchandise. Monopolistic competition is definitely which there are various firms selling differentiate items in a market. In addition, oligopoly is market composition in which there are some independent companies and monopoly is the only one seller available in the market and control the complete market.
3.1 Difference between the Features of Best Competition, Monopolistic Competition, Oligopoly and Monopoly
Number of sellers
Difference between products
Undifferentiated or Differentiated
Freedom of entry
Restricted or completely blocked
Ability to set price
Fast Food Burger Companies
Soft Drink Companies
3.1.1 Quantity of sellers
Perfect competition identifies exists whenever there are a whole lot of sellers in a market , nor have large seller to determine the product value and monopolistic competition is certainly when a major number of sellers produce goods that are incredibly similar but happen to be perceived by purchaser are different. Within an oligopoly market, there contain at least two and more
firms controlling the marketplace while monopoly means that there are several buyers but only 1 seller controls the way to obtain a products and its own price. The best example of perfect competition is farming and junk food burger companies like MCD will be the example of monopolistic competition. Also, example of oligopoly is coke which has many types like Coca Cola, Pepsi and Cola Turka as the exemplory case of monopoly is Microsoft.
3.1.2 Difference between products
This is homogeneous product in perfect competition. The products offered for sale are perfect substitutes of 1 another and in addition must identical in every respect to all retailers. Under monopolistic competition, item differentiation allows firms to charge a high price and collect some income. In oligopoly that are provided homogeneous or differentiated goods while monopoly market happen to be no close substitutes, for the reason that monopolistic create and design the merchandise by their own. For instance, farming such lab report example biology as organic and natural vegetables and some tropical fruits are the example of best competition and KFC and Burger King are the exemplory case of monopolistic competition. Also, automobiles, banking and petroleum will be the exemplory case of oligopoly. Cable companies such as for example media and power like Tenaga Nasional or Pos Laju are the exemplory case of monopoly.
3.1.3 Flexibility of entry
Generally, there is free of charge entry and exit in ideal competition and monopolistic competition. If have got any barriers to access for new companies and rates are decided by supply and needs. Companies in an oligopolistic market obtain and retain industry control through barriers to entry. The noted of access barriers are exclusive resource ownership, other government limitations, high start-up cost and copyrights. Besides, monopoly isn’t allow other companies to entry and work their business on the market. For example, if a company wants to promote tropical fruit in this area, it will need to have resources, labor and cash to perform the business. If the business was earned less profit, owner can exit the market with no restrictions. The exemplory case of monopolistic competition is if a company wants to entry aluminum industry, the organization must find different top quality, brand name and design and style of the aluminum to run the business in this market.
3.1.4 Capability to set price
Perfect competition struggles to set price as the price is based on the marketplace price. Therefore, distributor and buyer aren’t allowed to change the purchase price. For example, the cost of the mineral water is defined by supply and demand is $1 per bottle. Thus, all sellers and clients already know the merchandise price and cannot change it. In addition, under monopolistic competition, sellers can change the price if they want. This is because there are similar product but different brands name, quality and design of the product. Therefore, seller can change the price of the merchandise without influence the entire market. For example, chicken rice in ordinary restaurant is only sell off $3.50 per plate however in Chicken Rice Shop Cafe is advertising $8.90 per plate. That is the different between the quality and style of the product. Under oligopoly, it is a market most depend on strategic. When one seller lowers the cost of the product, another business of oligopoly also will follow to lower the price of the product. However, because there will be rival businesses, oligopolies must focus at how they respond to its change in price, output, product or marketing. For instance, if F&N Soft Drink Company increases the price of the soft drinks, other soft drink companies may also follow to increase the price. Also, monopoly able to set the price of the product because monopolistic is definitely a price-maker. This is due to there is only one seller in the market and decides the cost of the merchandise. Therefore, consumers have no choice and have to use their product and service. For example, Telekom Malaysia Bhd â„¢ is definitely increase the talking time of house telephone to home phone to RM0.50 sen each and every minute, so all users have to accept and follow the price by authorities because monopolistic is price maker.
3.2 Summary of Ideal Competition, Monopolistic Competition, Oligopoly and Monopoly
In summary, there are difference characteristic in these four common types of market structure which is perfect competition, monopolistic competition, oligopoly and monopoly. In ideal competition, there are numerous buyers but only 1 seller in the market while under monopolistic market, additionally, there are many sellers on the market. In addition, in oligopoly there are only several sellers available in the market and monopoly only 1 seller control the entire market.
4.0 Conclusions and Recommendations
In conclusion, after full these two jobs, I gained extra knowledge about the aspect of monopoly and it’s really characteristic. In a monopoly marketplace only has one vendor running the business in entire market. Consequently, there is no competition with others. A monopolistic must also ensure no barriers to entry of others.
In addition, free industry structure is the competition that comes from allowing anyone who must sell a particular service or item to do so. Under market structure generally there have four common types which are best competition, monopolistic competition, oligopoly and monopoly. There will vary market with different attributes and examples.
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