In economics, monopoly is widely defined as a market structure where there exists only a single seller producing a commodity with no other close substitutes. This single seller can either be an individual owner or a partnership company or even a joint stock company. This single…
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d ‘Wonks’ which was started by two smart lawyers who secretly bought up all the firms of this sector and began their operations as a monopolistic firm. The intention of this paper is to gain an in depth understanding of the monopoly market structure in comparison to the monopolistically competitive market structure with reference to potato chip industry.
A monopoly market structure is characterized by meager or insignificant competition and complete control of the monopolist over the market. It is often learnt to be extremely profitable to the shareholders who intends to invest in a monopolistic business. It is because of the fact that the shareholders have to face insignificant risks of suffering loss from the business as the monopoly firm enjoys an apparent influence over the price of the commodities which can be altered at any time to substantiate the probable risks, thus securing the shareholders’ value. Moreover, a monopolistic firm also enjoys minimum exposure to the risk of close substitutes, since there are no other firms associated with supplying the same product. In case of a monopoly market, since there is only a single firm in market selling a particular commodity, it also becomes easier for the government to regulate the market operations (Petru, 2011).
A monopoly firm is found to be consistently innovative in the long run for the reason that if the firm does not encourage innovation in its products and/or services, the consumers may opt for a substitute of the product instead of the same monotonous commodity which in turn is most likely to reward better market opportunities to the new entrants. In other words, it can be affirmed that if a monopoly firm continues with a same product without innovation, as a result of the growing consumer demand for new products, new entrants are most likely to get an opportunity to invade the market. Thus, it is quite likely that a monopoly market structure will be able to reward better customer services with
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(The Potato Chip Industry Term Paper Example | Topics and Well Written Essays - 1500 Words - 1)
“The Potato Chip Industry Term Paper Example | Topics and Well Written Essays - 1500 Words - 1”, n.d. https://studentshare.org/macro-microeconomics/1447488-the-potato-chip-industry.
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