Monopoly Market

  

                         Monopoly market

 

Monopoly occurs when a company and its products dominate a sector or industry and a firm, and its products control a market.

In an extreme free market capitalism, monopoly is feasible. There have been no constraints or restraints. When a company or group owns a product or service.

Monopoly Characteristics:

Absence of competition: In a monopoly market, there is also no competition because the monopolist dominates the market and profits. This is because monopoly creates a barrier to entry in the market.

Lack of product variety: Because there are only a few sellers in the market, there is a lack of product variety. The monopolist is the sole provider of goods or services in the monopoly market.

Price: Because there are no competitors in the market, the prices of the product below are usually set by the producers. This is because product or service demand is continuous.

Product quality: In a monopoly market, product quality is rarely updated because the business sector or industry dominates the industry. Monopolists only feel compelled to update their products or services when a new competitor enters the market. It's challenging to differentiate products in this market.

Natural monopoly: When the government enables select enterprises to offer critical services, there is sometimes a natural monopoly. In this situation, the firm may be granted a patent, and the government may set a specific barrier to entry.

 

Factors of Monopoly:

High entrance barriers: In a monopoly market, competitors have a high barrier to entry and are not permitted to participate. This eliminates the market's competition.

Other than the monopolist, no other seller can sell into the monopolistic market.

The monopoly market's price maker is the company that sets the price. Monopolies could raise prices whenever they choose. In comparison to the profit made, the supply is limited.

Economies of scale: in a monopoly market, producers are usually able to produce at a cheaper cost. Purchases large quantities of inventory. As a result, maintaining economies of scale is simple because they can decrease prices at any time to limit new entrants into the market and eliminate competition.

Pure monopoly refers to a situation in which there is only one vendor in the market and no other near substitutes.

Example of Monopoly: Microsoft Corporation has controlled the market for computer software and operating systems for many years. In a monopolistic market, there is never ideal competition.

Monopolistic Competition

Monopolistic competition occurs when there is just one player in a market. Monopolistic competition occurs when a corporation retains some market dominance despite the presence of several vendors in the industry and many similar substitutes for goods. When there are multiple vendors in a firm offering identical products or services, but their offers aren't perfect alternatives, it's called a duopoly. In a duopoly market, there are less restrictions on market entry. Companies in a duopoly try to set themselves apart by offering lower prices and better marketing. However, because the attributes of the items are so similar, it becomes difficult for the buyer to pick between competitors' products in the duopoly market. Restaurants, retail merchandise, hairdressers, and other such establishments are examples.

 

In a monopoly market, a single price is fixed for all clients, as seen in the graph. The term "deadweight loss" refers to the potential profit that monopolists or clients could have made. In a monopolistic market, there is imperfect competition.

Natural monopoly is defined as a situation in which there is a high fixed cost and a high start-up cost. Natural monopoly is a word used to describe a situation in which a product requires unique raw materials or technology that is only available from a single company.

Some companies hold product patents, which eliminates competition. Pharmaceutical companies, for example, hold patents to produce certain pharmaceuticals, which serves to eliminate competition and create a monopoly in the industry.

Government-created monopolies are known as public monopolies. Consider the utility industry, which produces water and energy. The government authorises only a few companies to enter this sector. This is since resources are limited and should not be squandered or consumed in large quantities. As a result, the government sets stringent rules on certain businesses, believing that having a single provider of services like this will be more efficient.

Sources of monopoly power:

There are certain powers to monopolies which affects the new entry in the market. These are as follows:

Monopolies have various powers that effect new entrants into the market. The following are some of them:

1) Capital requirement: in a monopolistic market, producing goods or services necessitates a huge capital investment as well as the use of research and development costs, which prevents new entrants.

2) Technological superiority: a monopoly market may necessitate significant technological expenditure. Efficient technology that comes at a high cost may obviate the need for a new entrant into the market.

3) No close substitutes: In a monopolistic market, products may have no close substitutes, making demand for the same goods relatively inelastic.

4) Raw material control: It is difficult for new entrants to enter the market if a monopolist controls the raw materials required for the manufacturing of goods.

Oligopoly

Oligopoly is a market state in which a small number of major enterprises controls the market and prevents new competitors from entering.

 The image shows different types of monopoly markets.

Antitrust laws:

Antitrust laws were enacted by the United States government in 1890 in attempt to reduce monopolies in the marketplace. This law was enacted to defend consumers' rights and prevent trade-restrictive activities.

Two more antitrust laws were introduced in 1914 in attempt to prevent monopolies and safeguard consumer rights.

The goal of these legislation was to make it easier for businesses to do business in the market and to remove trade barriers.

In addition, many laws and restrictions were created by governments in many nations to avoid market monopolies. To preserve consumer rights while allowing new businesses to enter the market

Because there is no competition in the market owing to monopoly, the price of the product is always affected. Consumers are forced to pay exorbitant costs for products or services that are not worth the exorbitant rates. Due to monopoly, poor products sometimes have high pricing. Firms take use of their position of dominance by imposing artificial sacrifices, such as high pricing, in order to circumvent the natural rule of demand and supply. This creates a barrier to experimentation and the development of new products.

Monopoly's drawbacks include:

Monopoly markets reduce market efficiency and have a detrimental impact on consumer and producer rights.

The prices are determined in the monopolistic market are highly unjust, as things are generally sold at a high price. Monopolies have no fear of losing clients or sales because there is no competition. Consumers have few alternatives because the monopolist controls the market and demand is steady.

 

Content and presentations:

This topic is significant in the professional exams for both undergraduate and graduate courses, especially for 

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