Monopoly and Oligopoly - Essay Example

Monopoly and Oligopoly al Affiliation: Difference between Monopoly and Oligopoly Oligopoly is an economic market characterized by many sellers. It can also be explained as the market defined by a large number of firms. Most of the products or services offered by oligopolies are standardized or may not be standardized. The same product or services are closely related making them experience some competition. Here are some firms under oligopoly market structure; fast-food companies such as McDonald, Wendy’s, and Burger King.

Wireless network providers in the U.S. also falls under oligopoly market structure. Sprint, AT&T, T-Mobile, and Verizon are firms under oligopoly market Structure (Tucker, 2010). Another feature of oligopoly is that the actions of another firm largely affect the other firms. It means that the success of another firm depends on the action of another firm. Oligopolies would want to know what other firms have availed in the market. For example, McDonalds will keep monitoring what Wendy’s have made available in the market.

Oligopolistic market also has a bit of a barrier for entry to the market but not like monopoly market structure. Conversely, monopoly is characterized by the products differentiation. This means that the firm produces a product that is unique. This means that there is no close substitute for the product. Monopoly operates as a single seller in the market; it is a firm that provides most of the supplies in the market. Bookstores in campuses are some examples of monopolies. Unlike perfect competition, the kind of market that monopoly operates is not easy to enter due to quite a number of barriers for entry such as legal barriers (Tucker, 2010).

Illegal Monopoly and Natural MonopolyA natural monopoly is where by one firm stands out as a primary supplier despite the presence of other firms. In this industry, it is advantageous for production to be concentrated on this major firm rather than contested competitively. Natural monopolies are mostly public utilities. The legality of these natural monopolies is based on the fact that it is economically sensible to have them. That is the cost of production of goods and services, for example power, by these monopolies, are very high such that it is economically sufficient if only one company produces it.

The government however regulates the operation of the two monopolies. This information shows why ‘natural’ monopolies are legal and other monopolies illegal (Hirschey, 2008).Laissez Faire position about monopolyLaissez-faire is seen as an economic-policy doctrine. This doctrine opposes government interference in business other than the minimum functions of ensuring peace, administering justice and providing essential public goods. The Laissez-faire concept shows how a monopoly works and its effect on society.

Laissez-faire favours limited government interference which is how a monopoly is. The control of production of goods and service price setting and quality are all left to the business enterprise. Laissez-faire concept would favour a monopolistic type of enterprise as they are of similar fashion (Reder, 2001). ReferencesHirschey, M. (2008). Fundamentals of Managerial Economics. Ohio: Cengage Learning. Reder, W. M. (2001). Economics: The Culture of a Controversial Science. London: University of Chicago Press.

Tucker, I. (2010). Survey of Economics. Ohio: Cengage Learning.