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Competition not only helps the customer but also the company itself. The constant challenge to outdo the rival helps companies to stretch an extra mile and work optimally.
Barriers to entry keep the businesses constrained and discourage them to enter the market. In a perfectly competitive market a lot of suppliers of goods and service exist, a lot of buyers exist, the barriers to entry are non-existent and the market is characterised by non externalities. In a pure monopoly the demand curves of market and the firm are identical. However, in a pure competition the demand curves are different for both market and firm. The demand curve of the firm is perfectly elastic because it sells product or service at the equilibrium price.
Natural monopolies exist without any regulation in place but due to the technological and cost advantages of the company. The prospective entrant can not afford to invest in the technology or share cost advantages of the initial firm in the same industry. For example, DeBeers has control over the natural resource of diamonds. Practically all diamonds in the world have come into the control of DeBeers in South Africa.
IBM enjoyed monopoly for a long time because of copyrighting and patents rules. Gas, electric and bus companies are usually monopolies in their respective country because of the huge cost of capital and maintenance cost.
Monopolies are often call price setters and many exploit their status to discriminate price for its consumers. In real world, pure monopolies have mostly been characterised as less efficient. Pure monopolies supply is hardly equal to the market’s demand. The consumer are constrained by making alternate choices as there is no other firm in the same industry. This has grave implications on the society we live in. The self interest battle between the pure monopoly and the society can cause loss of goodwill for the monopolies.
However, natural pure monopolies do not exploit the
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The author of the essay comments on the concepts of micro economics and macro economics. To be precise, the author provides the idea of Samuelson, who states that economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
Government Regulation and Monopoly Power
It is axiomatic that people with like interests work together to further those interests. It comes as no surprise that these people will attempt to lobby legislative or rule-making bodies to create special protective legislation for them.
The research delves into monopolistic competitive market. The mere mention of monopolistic competitive shows that there are many small competitors in the same market. The competitors sell different products that can fill the same need. For example, the grocery store sells different brands of cheese.
As it is shown in the essay, monopoly is a market structure where there is a single producer or seller of the product in the market with no substitutes available. The paper focuses on uncovering of the relative inefficiencies of the monopoly market, compared with other structures. This market produces less output with higher prices.
The author states that one of the key points covered in the article include the objections against a monopoly as understood by the economists. The argument against monopoly is that in the absence of competition, monopolies can charge whatever they want and the charged prices are usually higher than the prices under perfect competition.
Under free trade environment the market itself fixes the price whereas in the Monopoly structure the monopolist being the only supplier fixes the price at which goods or services will be provided. In the monopolist market structure there are no close substitutes to the product or service the monopolist deals with and there are different barriers to enter the market.
In three years time the patent on the “Neutron” expires and another competitor enters the market making the market an Oligopoly. After a few years, since Quaser faces Monopolistic competition, it has to change its pricing and marketing strategies as there are more competitors and less possibilities of controlling the price
In addition, this paper will tell Oligopoly theory gives us a rather confused picture of the relationship between economic profits and market structure" Has empirical investigation of this relationship helped us to clarify the picture? Why might it be argued that it takes only a few rivals competing in the same market to achieve an outcome very close to that of large numbers 'perfect' competition? Does it make much difference if the rivals can cooperate with one another?
As defined previously, in a perfectly competitive market, there are an infinite number of sellers selling the same product (Salsman). This means that none of the sellers have power to dictate the prices for the good. If a seller