...Week Three Assignment: Do Monopolies Exist? Name Ashford University Eco 100 Instructor Date Week Three Assignment: Do Monopolies Exist? To answer the question of the existence of monopolies does not require an extensive discovery process. A simple flick of the light switch on the way out to mail a letter should be enough evidence to convince an otherwise skeptical public of the existence of monopolies. A monopoly is established when the barriers of entry into its market is sufficient to block out its competitors and when the price elasticity of demand is such that the firm can charge as much or as little as possible to its customers. Though it is true that “all firms compete for consumer dollars” (Brue and Flynn, 2010, pg. 237), all firms are not created equal. A monopoly’s customers will give the firm their money regardless as long as the firm keeps its potential competitors at arms-length. If you wish to send a first-class letter, there is no other viable option other than the United States Postal Service (USPS). This is because the barrier of entry into this market strong enough to block all other firms. The USPS has competitors in the parcel delivery service; UPS, DHL, and FedEx to name a few. However, none of those firms can compete with the price of sending a letter (currently $.45) to anywhere in the United States. Of course, if the postal service were to significantly raise the postage rate competition would surely ensue. The same case...
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...DO PURE MONOPOLIES EXIST Page 2 Do Pure Monopolies Exist? Thesis Statement: According to the Essentials of Economics textbook a monopoly is defined as "a market structure in which the number of sellers is a small that each seller is a small that each seller is able to influence the total supply, and the price of a good or service. My essay is going to talk about if I agree if pure monopoly exist. Do I agree that pure monopoly exist actually, I do not agree totally with this statement. I believe that pure monopoly can exist up until another company or companies replace and create a competitive market that can cause the fixed prices to fluctuate. A natural monopoly is a firm with such extreme economics of scale that once it begins creating a certain level of output, it can produce move at a lover cost then smaller competitor. "Natural monopolies occur when, for whatever reason, the average cost curves decline over a relevant span of output quantities. (Spark notes Editors, n.d.) A monopoly is different from competitive firms in that it is not a price taker. Because it's only supplier in the market, it faces a downward sloping demand curve, the market demand curve. As a result, the monopoly is free to choose its price and quality according...
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...(Spring 2007) 11-21 Applicability of the Theories of Monopoly and Perfect Competition -Some Implications Ravinder Rena * College of Arts and Social Sciences Eritrea Institute of Technology Gobind M. Herani * Indus Institute of Higher Education (IIHE) ABSTRACT This paper addresses the concern that monopolies arise naturally out of the free market. An attempt is made to compare and contrast two theories of monopoly economic and political monopoly that this is not true. This paper further demonstrates that the two theories of monopoly have their separate roots in two opposite theories of competition: perfect competition and competition as rivalry. Hence the paper discusses only one of these theories of competition accurately describes the nature of competition in an economy. Besides, the paper also delves the two theories of competition and monopolies are derived from collectivist and individualist political philosophy. It illustrates how perfect competition and economic monopoly have undermined economists' understanding of the actual nature of both competition and monopoly. After investigating these theories, an attempt to made to apply them to show how one can come to very different conclusions about when monopoly power does and does not exist. Keywords : Monopoly, Perfect Competition, firm, industry, government, egalitarianism, etc. 1. INTRODUCTION It is often claimed that a free market leads to large firms gaining monopoly power and being able to restrict the output of the...
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...In today’s society, there are many different monopolies that are still evident despite the perceived idea that pure monopolies do not exist. A monopoly is the complete control of the entire supply of goods or a service in a certain area or market. Although most firms have some type of competition, rare forms of pure monopoly exist in the business world in some of the biggest companies. Pure monopoly exists when a single firm is the sole producer of a product for which there are no close substitutes (Brue, 181). Even if firms are not competing directly with one another they are all competing to get the attention of the customers. While having a company, there is an expected amount of rivalry that comes along with it, but then again, in a pure monopoly there is no other competition because of the sole control over the sale or production of a certain product. A prime example of a pure monopoly is the post office. Being that they are the only mailing service that distribute mail to every house every day, exemplifies the rare form of monopoly that still occurs. The market makes their decisions based off of supply and demand. If a company has an abundant supply of a product, simply lowering their price eliminates competition and gains the attention from desperate customers leading to a curve in the demand which results in a pure monopoly. However, the government has always tried to avoid monopolies since the 1890’s and 1900’s with the Sherman and Clayton Antitrust Act that were...
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...In this paper, I will be summarizing legislation known as the Antitrust Laws, identifying the purpose of industrial regulation, social regulation and natural monopolies. I will help explain how and why each exists and their impact on society. In addition, I will also explain the three main regulatory commissions of industrial regulation, and finally explain the major functions of the five primary regulatory commissions as they govern social regulation. There are four major pieces of legislation that prevent monopolies from occurring, these are collectively known as the Antitrust Laws. These laws help foster competition. The first law is the Sherman Act of 1890; this law prohibits monopolization and anything that might prevent trades such as fixed pricing and agreements between firms. The second law is the Clayton Act of 1914; which prevents price discrimination and manipulative contracts. This act also makes sure a company’s board of directors cannot serve on a direct competitor’s board of directors, and prevents companies from buying stock from direct competitors as well. The third is The Federal Trade Commission Act that was created in 1914, and then amended in 1958. This act was created to enforce anti-trust legislation, when it was amended in 1958 to protect consumers from false advertisement and products bought due to misleading information. The Celler-Kefauver Act of 1950 amends the Clayton Act of 1914 by closing loopholes firms used to acquire the assets of a company...
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...| Natural Monopoly | Telecommunications Law and Regulation Week 2 | | | 9/10/2012 | | I believe that times change and as they, change rules and regulations must adapt to the times. Therefore, the treatment of the different industries must represent the different industries as they grow. I do not think the Telephone and Broadcast should never have or ever be considered a “Natural Monopoly”. The concept of natural monopoly presents a challenging public policy dilemma. On the one hand, a natural monopoly implies that efficiency in production would be better served if a single firm supplies the entire market. On the other hand, in the absence of any competition the monopoly holder will be tempted to exploit his natural monopoly power in order to maximize its profits. A "natural monopoly" is defined in economics as an industry where the fixed cost of the capital goods is so high that it is not profitable for a second firm to enter and compete. There is a "natural" reason for this industry being a monopoly, namely that the economies of scale require one, rather than several, firms. Small-scale ownership would be less efficient. Natural monopolies are typically utilities such as water, electricity, and natural gas. It would be very costly to build a second set of water and sewerage pipes in a city. Water and gas delivery service has a high fixed cost and a low variable cost. Electricity is now being deregulated, so the generators of electric power can now compete...
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...Monopoly The central theory in all of the profit-maximizing outcomes rests on the idea that marginal revenue should equal marginal cost. The same is true in the case of a firm with monopoly power. Before we discuss the profit-maximizing outcomes, it is important to understand what is meant by monopoly and how does it affect revenues and costs. A firm has a monopoly if it is the only supplier in the industry of that particular product or products. Moreover there are no close substitutes. Therefore the consumers in this market have no choice but to buy from that one firm or not at all. For this reason, the monopolist is known as a price-maker because it has the opportunity to set prices at any desired level (Mankiw, 2000). Monopolies occur largely because of the existence of barriers to entry in a given industry. These barriers include legal barriers (patents and licenses), economic barriers and natural barriers. Under legal restrictions, government allows anyone firm a special right to manufacture or trade that particular product. This happens usually when a firm acquires a patent or a special right to market that particular product. Also sometimes the government would grant any one organization to dominate an industry such as a telecom firm that happens to be the only firm providing telecommunications services. Other barriers include control of a scarce resource or input as in the case of the South African diamond syndicate. Technical superiority as in the case of Microsoft...
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...Market Structures A market structure in economics describes the state of the market with respect to its competition. There exist several different market structures like perfect competition, oligopoly, and monopolies among others. These markets all produce different types of goods or services, as public and private goods as well as everyday and collective goods. Firms operating in these different market structures utilize the labor market in very different ways because of very divergent uses of energy in each market structure, so it is important for a firm to use the labor market equilibrium principles to their advantage to efficiently cover the costs of production and maximize profits. In economics a good is something defined as any object, service or right that increases utility, directly or indirectly. Goods are further broken down into public and private goods. A public good is a good that can be used simultaneously by many users, which is called non-rival, and people who have not paid for the good cannot be excluded from its utility, which in economics is call non-excludable. Together this means that the consumption of a public good by an individual does not affect the availability of that good to anyone else, which is called being non-rival and non-excludable. It’s obvious to see, however, that a truly non-rival and non-excludable good can’t exist; economists just look at the goods that come close to the definition of a public good. A private good is the opposite and...
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...may also include a demographic and regional breakdown of providers and customers and an analysis of pricing structures, likely technological impacts, and domestic and overseas sales (BNET 2003). The four elements to be discussed in this assignment are competitive markets, monopoly, oligopoly, and monopolistic competition. Each of these market structures produce differing results based on specific characteristics. Since the goal of all business is to maximize profits, it is up to each individual business to determine which market structure makes sense. A competitive market, also known termed perfectly competitive market, has two distinct characteristics. There are numerous buyers and sellers in the current market and the goods that are offered by the sellers are very similar in value and product. A competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. In this market environment, no one participant holds any market power or influences the price of the product it buys or sells. An example of this type of market structure could be street food vendors in a metropolitan area. There are relatively few barriers to entry/exit exist for street vendors. Furthermore, there are often numerous buyers and sellers of a given street food, in addition to consumers/sellers possessing perfect information of the product in question. It is often the case that street vendors may serve a similar product, in which little...
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...Monopoly Erinn Copeland ECO204: Principles of Microeconomics (BQC1232A) Instructor: Melvin Landry September 10, 2012 Monopoly Monopolies in the business world exist because dominating companies create obstacles that impede smaller companies from having an impact on the market. Monopolies are defined formally "as one firm within an industry that produces a product for which there are no close substitutes and in which significant barriers exist to prevent new firms from entering the industry” (Case, Fair, & Oster, 2009, pg. 254). When operating within an industry where entry into that industry is easy, a company has some market power because the product they are offering is the norm; however, when operating as a monopoly, companies dominate the market because their distinctive product carries more market power. Is it more beneficial for a company to operate as a monopoly or is it more beneficial for a company to share market power with other companies within their industry? Monopolies have stakeholders such as other businesses in their industry and consumers, which are affected by how they dominate an industry. How effective is a monopoly for the stakeholders within that company? Companies that operate as a monopoly do so because there are benefits to operating this way. In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competing in a monopolistically...
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...that market, the factors that differentiate the firms from each other, the similarities between the firms, and any obstacles that would exist to any firm that wanted to enter the market. The level of competition exerts significant influence over the type of market structure that emerges and leads to what payoffs, if any, would result from entering that market. This paper will go into detail on the many distinctions between the different market structures, the obstacles to entering these markets, and how each type of structure maximizes profits. Markets are broken down into a few various categories. These categories are perfect competition, monopolies, monopolistic competition and oligopolies. An economist, citing economic theory, may express a preference to one type of structure based on the outcomes they can yield. The structure of each structure type is based on the traits of its business types. The attributes a business will display changes with the number of companies in that particular market. Management of prices, product types and entry barriers for new companies and market competition that do not depend on price are the attributes of a market. The capacity to control the prices of a company’s goods is price management. This is a critical element in market structure. Any company that can enjoy the benefits of a monopoly structure has ultimate price control for its goods. Those in a perfect competition have no control over their prices since they are controlled...
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...Competition Western Governors University Competency 309.1.3: Competition Competency 309.1.3: Competition 2 A. In the years following the civil war, large trusts formed among key industries. These large monopolies were able to set prices, restrict output, and pressure resource suppliers. At the end of the nineteenth century the government began to intervene with the introduction of antitrust legislation (McConnell, 2011, p. 375). The first of the major antitrust laws was the Sherman Act of 1890. The Sherman Act served two purposes. First it outlawed restraints on trade. This made it illegal for trusts to work together setting prices or dividing markets. The goal was to end collusion that would cause economic gain for the parties involved and harm the consumer. The second part of the law outlawed monopolization. The act gave the courts the power to financially penalize and potentially imprison offenders, as well as the ability to break up the monopolies (McConnell, 2011, p. 375). The Sherman act was a good start, but was too ambiguous and didn’t achieve the goals it was intended for. The Clayton Act of 1914 expanded upon its framework. Where the Sherman Act was aimed at eliminating current monopolies, the Clayton Act served to prevent new monopolies from organizing. It had several sections that made illegal the acts of price discrimination and the tying of contracts. It also mad it unlawful for a corporation to acquire stock of a competing corporation in an ...
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...Monopoly is a term used by economists to refer to the situation in which there is a single seller of a product (i.e., a good or service) for which there are no close substitutes. The word is derived from the Greek words monos (meaning one) and polein (meaning to sell). Governmental policy with regard to monopolies (e.g., permitting, prohibiting or regulating them) can have major effects not only on specific businesses and industries but also on the economy and society as a whole. Two Extreme Cases It can be useful when thinking about monopoly to look at two extreme cases. One is a pure monopoly, in which one company has complete control over the supply or sales of a product for which there are no good substitutes. The other is pure competition or perfect competition, a situation in which there are many sellers of identical, or virtually identical, products. There are various degrees of monopoly, and rarely does anything approaching pure monopoly exist. Thus, the term is generally used in a relative sense rather than an absolute one. For example, a company can still be considered a monopoly even if it faces competition from (1) a few relatively small scale suppliers of the same or similar product(s) or (2) somewhat different goods or services that can to some limited extent be substituted for the product(s) supplied by the monopolist. A business that produces multiple products can be considered a monopoly even if it has a monopoly with regard to only one of the products. ...
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...Monopoly Market An Article Review Mahesh Shrestha Amberton University This article review was prepared for ECO6140.E1 -Managerial Economics, taught by Professor Dr. Benjamin Thompson. Monopoly Market Monopoly states a condition where a company or a firm serves or owns entire or mostly all the market with its produced goods or services and there are no close substitute to them. It is a structure or a situation where one corporation serves most of the marketplace. Where there is monopoly there is an absence of competition which often results in higher prices. Where monopoly exists, there is a regulation for a firm which sells the only product to exploit on the monopoly position by limiting output and charging the high price which would be above minimal cost. The point that a firm is the single seller of a good in a marketplace clearly gives that firm highest market power than it would have if it competed against other firms for customers. A textbook gives an example of utilities companies, such as electric or water companies. They are local monopolies in that only one utility offers service to a given neighborhood. (Baye, Michael; Prince, Jeff, 2013) There might be various companies which offer the similar services, but they don’t compete against each other. When one thinks of monopoly, one usually envisions a very large firm which needn’t be the circumstance, however: the applicable thought is whether there are other firms selling close substitute or not in a particular...
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...Nicholas Messina Econ201 What are some of the different types of barriers to entry that give rise to monopoly power? Give an example of each. Should government let monopolists exist or not? What are the benefits of monopoly market structure and what are those shortcomings related to monopoly? What is your opinion? (At least two pages and write down the answers to each question asked) In a perfectly competitive market, there are many firms, none of which is large in size. In contrast, in a monopolistic market there is only one firm, which is large in size. This one firm provides all of the market's supply. Some conditions that determine a monopolistic market is the fact there is only one firm competing and has entire control over supply of product with no close substitutes. The second is that there must be a high barrier to entry to explain why other firms have not yet entered the market. What are some of the different types of barriers to entry that give rise to monopoly power? Barriers to entry are defined as legal, technological, or market forces that may discourage or prevent potential competitors from entering a market. There are many different types of barriers that include government barriers, control of a physical resource, technological advancements, and large start-up costs. Governments may erect barriers that prohibits or severely limits new competitors. This is done in many cities and states that may allow a household to only use one certain energy, water...
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