StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Monopoly and Perfect Competition - Essay Example

Cite this document
Summary
1. Monopoly a) Explain using graphs how monopoly is less efficient than perfect competition. [3] Under a standard model, when a monopolistic structure establishes a single price in the market, a lower quantity of goods will be sold at inflated prices. This stands in contrast to perfect competition where more goods are sold at lower prices…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.1% of users find it useful
Monopoly and Perfect Competition
Read Text Preview

Extract of sample "Monopoly and Perfect Competition"

Download file to see previous pages

b) Why is MR less than price in a monopolistic market? [2] In a monopolistic market, the demand curve for the monopolistic business is the market demand curve. Since market demand is not perfectly elastic, the monopolistic demand curve tends to be slopping down. Sales can only be increased in such conditions by lowering the price. MR is typically lower than price for every level except the first, since the lower price affects not just the extra sales but also previous sales. Hence MR tends to decrease, since a monopoly has foregone price for a greater output. c) A recent report shows that cars made in Canada are sold at lower prices in the U.S. Although they do not have a monopoly, how would price discrimination help to explain this.

What does it say about Canadian consumers relative to those in the U.S.? [5] Price differentiation tends to exist when identical goods from the same provider are sold at different prices. Typically, price discrimination tends to exist in monopolistic markets or in oligopolistic markets where it is possible to exercise market power. Price discrimination between the Canadian and the American markets indicates that the same provider is selling the same product at two different prices in these markets.

Since the cars are priced lower in Canada, it indicates that the car provider experiences greater competition in the Canadian market. This forces the car provider to sell at lower prices overall. In contrast, in the American market, the car provider faces lower competition or perhaps no competition at all and so can sell cars at higher prices. Therefore, Canadian consumers are willing to pay less to buy cars, while American consumers are willing to pay more to get the same cars. This would also indicate that the Canadian car market is in the state of perfect competition, and the American car market that is in the state of monopoly or oligopoly. d) Give an example of a monopoly.

Briefly explain whether you believe it should remain as a monopoly or not. Support your answer. [4] Monsanto is a world leader in the commercial seeds market. Furthermore, Monsanto holds a monopoly in certain herbicide brands such as Roundup. This positions Monsanto as a global monopolistic giant that has the market power to alter prices when it feels appropriate. Already Monsanto is being investigated in the United States for breaching antitrust laws. Monopolies such as Monsanto should be broken up, since they cause more harm than good.

Monsanto is already responsible for inflating prices in the genetically altered seeds market around the globe. Such practices dissuade the use of such seeds in the long run by farmers around the world, which in turn leads to generally lower agricultural output. Since the market entry barrier is high for industries such as the commercial seeds market and the herbicides market, it is necessary to break up monopolies such as Monsanto. Only such steps can ensure that new market entrants can be introduced to alter the state of competition. 2. Perfect Competition a) Explain three ways in which international currency markets fit our model of perfect competition.

Make sure to explain the effect of the assumptions in the currency market. [6] A market could be theorized to have perfect competition when it meets certain conditions. The market has to be so populated with numerous small firms or producers that

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Monopoly and Perfect Competition Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Monopoly and Perfect Competition Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/macro-microeconomics/1453744-monopoly-and-perfect-competition
(Monopoly and Perfect Competition Essay Example | Topics and Well Written Essays - 1000 Words)
Monopoly and Perfect Competition Essay Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/macro-microeconomics/1453744-monopoly-and-perfect-competition.
“Monopoly and Perfect Competition Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/macro-microeconomics/1453744-monopoly-and-perfect-competition.
  • Cited: 0 times

CHECK THESE SAMPLES OF Monopoly and Perfect Competition

Monopoly as an Enemy to Good Management

Monopoly and Perfect Competition and to a slightly lesser extent similar models along the vast range of economic models falling halfway between these extremes for example Oligopolies.... perfect competition represents the efficiency achieved by an industry which has extensive competition and almost no interference in the market forces either by the sellers or buyers or the government.... perfect competition, in contrast is preferred in this regard as a market structure where each firm has neither got any significant...
5 Pages (1250 words) Essay

Demand Curve Monopoly and Perfect Competition

emand Curve – Monopoly and Perfect Competition: In a perfectly competitive environment, a purely competitive firm is a price taker, i.... Monopolistic Seller – Demand CurveIn a perfect competition, a particular seller takes up the price set by the market.... Why is the pure monopolist's demand curve typically not purely inelastic? In a perfectly… monopoly market is one where one company owns all or nearly all of the market for a particular type of product or service, i....
2 Pages (500 words) Essay

Comparison of Perfect Competition and Monopoly

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.... 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.... 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....
8 Pages (2000 words) Essay

What would happen in a market that is transformed from a perfectly competitve market to a pure monopoly

Monopoly and Perfect Competition are exact opposite of each other.... In perfect competition, producers and seller try and differentiate their offerings through advertisements and creating brands.... ""Pure and perfect" Competition?... Due to fierce competition and lack of market power, sellers experience low margins of profits on the goods they sell (Case and Fair).... If a seller and Section # of What would happen in a market that is transformed from a perfectly competitive market to a pure monopoly?...
2 Pages (500 words) Essay

The UK Top Coffee Shops

These coffee shops are into continuous expansion, which means they substantially receive tremendous amount of acceptance from their respective target markets.... In 2010, Nero had more than 400 branches in the UK.... Today, as stated in its website, Costa has more than 750 branches in… In 2009, Starbucks on the other hand had 727 stores and 400 of them were situated in London....
6 Pages (1500 words) Coursework

Types of Market in Economy

In perfect competition firms are the price taker and they all sell similar products.... All the firms in perfect competition maintain almost the same price and faces horizontal demand.... It is known as pure competition with many buyers and In oligopoly the whole market is controlled by small group of firms.... This market has small competition with high price.... Monopolistic competition is an imperfect competition where many producers sell different types products....
6 Pages (1500 words) Essay

Creation of a Monopolistic Market

This is applies to both market structures of Monopoly and Perfect Competition.... The closest contrasting market that can be used to gauge the level of marginal revenue of the monopolistic market is the perfect competition market structure.... In the perfect competition market, there exists a huge supply of both customers and suppliers in that; the demand and supply is equal and none of the factors influencing supplies overshadows the other....
2 Pages (500 words) Essay

Monopolistic and Perfect Competition

… Monopolistic and perfect competition Monopoly For years, specific space entrepreneurs have enjoyed monopoly across the globe.... 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).... 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....
4 Pages (1000 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us