This essay talks about advantages and disadvantages of perfect competition and monopoly, as market structures for the whole economy and for customers and producers, as well. Market structure is considered as one of the central themes of economics. …
Download file to see previous pages...
This essay describes two of the market structures, such as perfect competition and monopoly by comparing and contrasting the various defining characteristics of both structures. Economics classify markets, according to the industry within which the firms work and how they affect the overall economy of the country. However, on the other hand, industry is the combination of various economic variables, which determine the overall nature, characteristics as well as extent of the competition within that particular industry.
There are different market structures which define the various and unique characteristics of the different market structures present in the economy. Monopoly and perfect competition are two of the most important market structures which are present in the economy offering different advantages and disadvantages to the consumers.
Perfect competition is a market structure in which there are large numbers of fully informed buyers and sellers of a homogenous product with no obstacles to entry or exit of firm in the long run. Monopoly is often characterized by the market power where monopoly as the ability to influence the market specially in terms of the total quantity produced and sold in the market.
It is believed that perfect competition is something where resources are efficiently utilized and efficiency is achieved as perfect market tends to maximize the total utility of the consumers. Monopoly firm has the ability to charge higher prices which ultimately reduce the consumer surplus for the firm.
...Download file to see next pagesRead More
Cite this document
(“Comparison of Perfect Competition and Monopoly Essay”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1547701-comparison-of-perfect-competition-and-monopoly
(Comparison of Perfect Competition and Monopoly Essay)
“Comparison of Perfect Competition and Monopoly Essay”, n.d. https://studentshare.org/macro-microeconomics/1547701-comparison-of-perfect-competition-and-monopoly.
It is these market structures which determine the behavior of the firm in that industry. Perfect competition is on one extreme of the spectrum. Although it may not exist in our world today it plays an important role as a model to study when analyzing levels of competition.
So the goal of the firm is profit maximisation. We shall study the two types of markets – perfect competition and monopoly, and discuss why in the long run the former earns normal profit but the later earns more than that. Perfect competition is a type of market which fulfils all these five assumptions.
One needs to find a trade off to maximize his utility. Besides that, there are several hindrances which force him to make rational decisions while apportioning resources effectively. This principle segregates market into two extreme continuums of market structure which are Monopoly and perfectly competition.
As monopoly proceeds, the consumers will ultimately forego the product, especially consumers who value the product or service more than they value its cost. This tends to create a deadweight loss. The deadweight loss also indicates that the combined surplus for the monopolists and the consumers is always lower than that for perfect competition.
Economic efficiency is a relative term; any economy will be more efficient once it manufactures more products and provides more services for society than another by using the same or lower input (Bresnahan 1982). There are two models for market structure namely Perfect Competition and Monopoly markets.
This paper outlines the reasons, why both, economists and public, share their common dislike of monopoly. At given point in time and at level of production, perfectly competitive markets are highly likely to be much more efficient that monopoly markets. Governments should follow an indirect and implicit policy to break monopolies.
Which form of market is better can be subject matter of discussion and is controversial issue. Perfect market is the starting point around which other market forms should revolve or regulated. The case study of Microsoft Corporation with its monopolistic product in application software used in every computer is given below to highlight the model of Monopolistic from of market.
a group of players but there are certain areas where monopoly still exists and customers have to settle for it because they really do not have a choice.
The area in which I reside there is complete monopoly, although there are many cell phone towers but only one works in my