A monopoly refers to the dominance of one firm or company in the market. An oligopoly, on the other hand, is an economic market condition where there are several firms or companies that are present in a…
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An oligopoly is an imperfect competition among the few firms and it applies to an industry that has a few competing firms. Each firm competing in this imperfect market has enough power just like the other firms to prevent it becoming a price taker. However, each firm that competes in an oligopoly is subject to inter-firm rivalry to prevent it from viewing the market demand curve as its own. In the modern economies, oligopolies are the dominant market structures that characterize the production of capital and consumer goods and other industrial materials such as steel and aluminum.
The U.S. steel industry, for example, experienced the emergence of mini-mills that had lower capital costs in the 1980s. The mini-mills came up as a new industry segment that developed when the US steel industry had declined because of the Japanese competition. Nippon Steel Company, a Japanese firm was created to match the size of steel companies in US and acted as a key factor in the growth of the Japanese steel industry. The Japanese steel industry invested heavily in modern technology that served to increase the steel production by a percentage of 2216 in a period of 30 years between 1950 to 1980. As such, the mini-mills and imports had gained a quarter of the US market each by 1980 forcing many previous steel-based companies diversifying into new markets (Collard-Wexler & De Loecker, 2013).
This situation led to several changes in the market. The US government restricted imports to a quarter of the total internal market to save the US steel industry. Other changes that occurred include the investment of $ 9 billion in the increase of technological competitiveness, weakening of stringent pollution control laws and increasing labor productivity by cutting workers wages. The value of the dollar failed and increased import prices discouraging foreign competition. This stabilized the mini-mills to increase their market
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(Microeconomics Term Paper. Monopoly or Oligopoly Essay)
“Microeconomics Term Paper. Monopoly or Oligopoly Essay”, n.d. https://studentshare.org/macro-microeconomics/1638830-microeconomics-term-paper-monopoly-or-oligopoly.
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A firm located in this industry faces a more elastic curve than a monopoly because if producers try to charge higher prices to consumers, they can turn to other producers, a luxury which is not available in a monopoly. As a result, the resulting curve is more elastic than a monopoly indicating that this kind of firm cannot just charge any price, like a firm having a monopoly power.
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