Monopolistic and Perfect Competition - Research Paper Example

Monopolistic and Perfect competition Monopoly For years, specific space entrepreneurs have enjoyed monopoly across the globe. Space Exploration Technologies Corp or SpaceX is among the space enterprises which are seeking to put a stop to space monopoly (Hennigan, 1). Monopoly basically, is an enterprise that is a sole seller of goods and service in a certain industry. Under such circumstances, lack of government intervention results in exploitation of consumers. The consumers are entirely responsible for price determination and therefore they are likely to set high price so as to earn more revenue. Monopolistic business ventures tend to develop certain mechanisms that inhibit entrance of other firms into the industry. Monopoly can be achieved through sole control of essential resources required for the production of goods and services. Due to the unhealthy market conditions associated with monopolies, most governments have tried to eradicate it, since it is tragic to the economy. From the article, Lockheed Martin Corp and Boeing Co. are the key players or rather firms which can be deemed to be monopolistic; they serve solely in the market, set prices and control the entire market’s operations. The Los Angeles Times presents an article on monopolies about termination of the spy satellite monopoly by the space entrepreneur. Space entrepreneur Elon Musk is up against largest weapon markers, Lockheed Martin Corp and Boeing Co. for a military contract that is worth $ 70 billion. Boeing Co. and Lockheed Martin Corp. which were previously preferred by the pentagon to handle such contracts are now facing stiff competition from Space Entrepreneur in a bid to eradicate monopolies (Hennigan, 1). The launch of the government’s pricey spy satellite contract is becoming competitive since it is no longer a two-firm affair. Thus, once an opportunity is created for other firms to access the market in any monopolistic setting, competition is likely since the barriers to entry will have been removed. According to this article, the space entrepreneurs will be facing a stiff competition as the government will allow several firms to take part in the launch of satellites. Therefore, this would make the space market to be at equilibrium. A monopolistic business venture aims at maximizing profits by setting output where MR = MC. This will be arrived at output Qm and price Pm. One major reason behind previous monopolies, according to the article, is the high cost of setting up the satellites. Thus, firms have to form an alliance in order to manage such exercises which take ages to complete. For instance, Lockheed and Boeing companies were forced to form an alliance in the year 2006 since the market demand could never have sustained two chief competitors at the same time. Such alliances are meant to cut costs and reduce the time for launch preparation (Hennigan, 1). Customers in a monopoly market do not determine the prices of products. The Air Force being the chief consumer of the spy satellites is against competition in this market. It cuts down on the total number of launches since it sees no need of increasing the number of satellites in space. With the increasing number of firms which are willing to compete in this market, allowing for competition would be an appropriate move for the Air Force since it will have to select from the most friendly and affordable bid among the many offers. Moreover, the idea of the government paying a space company approximately $1 billion every year, whether a satellite is launched or not, is not logical. As much as this money supports the facility and the already launched satellites, this sum of money is considered much for such operations. Thus, competition in this market would give room for diversity and quality as firms will be struggling to remain the best and win the bid. . Work Cited Hennigan, W. J. Space entrepreneur seeks end to spy satellite launch monopoly. Los Angeles Times. 2014,April 13. Retrieved From: http://articles.latimes.com/2014/apr/13/business/la-fi-rocket-launch-showdown-20140414 Read More