Monopolies, Oligopolies and the Economy - 2018 Words

Monopolies, Oligopolies and the Economy Monopoly is a term to describe an industry where a seller of a product or service does not have a competitor offering a close substitute. The word is derived from the Greek words monos (meaning one) and polein (meaning to sell). Rarely does a pure monopoly exist. In a pure monopoly there is only one company making and selling the item in question; however there can also be the situation where there is one company who has the bulk of sales and the other firms in the same market have little or no impact on the overriding company. Due to lack of competitors, the monopoly company has control of the supply and price of the good or service, unless there is government intervention. The monopoly will†¦show more content†¦In order for the monopoly to remain, there has to be some sort of barrier to entry for new companies to enter the industry. Examples of barriers to entry would include high start up costs, limited resources, patents or legal barriers. A company can become a mono poly in different ways. In the case of Viagra, although the patent and monopoly were later lost, the company earned its monopoly position by offering the only product approved and patented for erectile dysfunction. In the case of the USPS the government outlawed any competition for them creating a monopoly. While a monopoly usually involves one firm with significant control on the market, an oligopoly contains a few firms. An oligopoly is a market structure where a few companies selling identical or differentiated products control the marketplace. The few players in an industry are usually quite large compared to the market for the product, thus giving these few players an advantage at market control. There are barriers to entry in oligopolies that include patents or government grants, ownership of resources, cost prohibitive barriers, brand equity and diminishing average cost. The leaders of companies within oligopolistic industries monitor decisions made by other players in the industry; this is called interdependency. The major companies within an oligopoly tend to compete through product differentiation or advertisingShow MoreRelatedMaximizing Profits in Market Structures Essays1238 Words   |  5 Pagesthe market, it can be said that a competitive market is a series of checks a nd balances for the economy. In a free market economy there are checks and balances in supply and demand. Competition affords buyers the prospect of receiving the best value for their money. Thus the competitive market is born. Monopolies The most prominent characteristics of a monopoly’s market structure are that a monopoly is the sole provider of a good or service and does not have any close competitors in the currentRead MoreMaximizing Profits in Market Structures1287 Words   |  6 Pagesare in a small area the higher the competitive the market. Monopolies: Monopolies are a group of business people who act as one. Considerable power is in the company’s ability to set and influence prices. The power is determined by the demand curve cladding the company and with almost no competition. Monopolies have no public ownership. When the competition is low and a company is dominating the demand curve it creates a monopoly because competition is low competition is never nonexistentRead MoreMonopoly Between Monopoly And Oligopoly1561 Words   |  7 PagesMonopoly isn’t just a board game where players move around the board buying, trading and developing properties, collecting rent, with the goal to drive their opponents into bankruptcy. However, the game Monopoly was designed to demonstrate an economy that rewards wealth creation and the domination of a market by a single entity. Monopoly and Oligopoly are economic conditions where monopoly is the dominance of one seller in the market and an oligopoly is a number of large firms that dominate in theRead MoreMonopoly Is A Market Structure1285 Words   |  6 PagesMonopoly is a market structure where there is a single seller of a product that has no similar competitors. In a monopoly â€Å"the cost of single firm dominance have long been recognized. Some cost may include, but are not limited to, allocated inefficiency† (Gal, 2003, pg.58). In a monopoly the market is a structure in which there is only one producer and seller for a product. In other words, the single business is the industry. The entry into such a market is restricted due to high costs or other holdsRead MoreMarket Structure and Analysis 996 Words   |  4 PagesThere are a few different market structures, competitive market, monopolies, and oligopolies. According to Mankiw (2007) competitive market, also known as monopolistic competition or â€Å"perfectly competitive market† is defined as â€Å"a market with many buyers and sellers trading identical products so that each bu yer and seller is a price taker† (Pg. 290). In this market structure there are two characteristics: there are many buyers and many sellers in the market and the goods offered by the various sellersRead MoreMarket Structures Of The Market1198 Words   |  5 Pagesspectrum, from perfect competition to pure monopoly. Market structure is the physical characteristics of the market within which firms interact. It involves the number of firms in the market and the barriers to entry. Perfect competition, with an infinite number of firms, and monopoly, with a single firm, are polar opposites. In standard usage of the term, competition may also imply certain virtues. Markets are the heart and soul of a capitalist economy, and varying degrees of competition lead toRead MoreWhy Most of the Industries Today are Oligopolies Essay622 Words   |  3 PagesWhy do you think most of the industries today are oligopolies? Q. Why do you think most of the industries today are oligopolies? Oligopoly is a market structure in which there are a few large firms with a concentrated market share, an example of an oligopoly today would be Nike, Reebok and Adidas for shoes. Most industries today are oligopolies, the possible reasons for this would be that oligopolies in contrast to monopolistic competition would be able to earn abnormal profits in theRead MoreMaximizing Profits in Market Structures Paper1129 Words   |  5 Pagesalong with factors such as: the ways in which these firms are alike or different, and the obstacles that exist in any new firms entering that market. In this report I will discuss Competitive Markets, Monopolies, and Oligopolies. I will point out what role each of the market structure play in the economy. This report will list the characteristics of each market structure. I will share how the price is determined in each market structure in terms of maximizing profits. This report will share how theRead MoreAn explanation of monopoly, oligopoly, perfect competition, and monopolistic competition - a detailed overview946 Words   |  4 Pagesocean - it has different species of marine life (industries), different swells (market structure) and even hot and cold spots (public companies). One of the key determinates to a successful national economy is the structure of its markets. The main market structures are: 1. Monopoly 2. Oligopoly 3. Perfect Competition 4. Monopolistic Competition Each of these market structures have unique characteristics, and can be classified according to three factors. The degree of competition, the firstRead MoreDifferent Types Of Market Structures1413 Words   |  6 Pagesthe price. On the other extreme end is Pure monopoly. A monopoly is characterized by an absence of competition, which will often allow one seller to control the market. A Pure monopoly is essentially the same thing, but also includes near impossible entry and no substitute goods. Two more common market structures are monopolistic competition and oligopoly. Monopolistic competition has a large number of sellers producing different products, while an oligopoly has only a few number of sellers producing