Premium Essay

Monoploy

In: Business and Management

Submitted By erinnwhit
Words 1810
Pages 8
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 competitive market structure. In 2008, two smart lawyers quietly bought up all the firms and began operations as a monopoly called “Wonks.” To operate efficiently, Wonks hired a management consulting firm, which estimated a different long-run competitive equilibrium. The Wonks transitioned from a monopolistically competitive firm to a monopoly. “Monopolistically competitive

Similar Documents

Premium Essay

Monoploies

...A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The verb "monopolize" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is business entity that has significant market power, that is, the power, to charge high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry or market. There are five main characteristics to make a firm a solid monopoly. You have profit maximize, price maker, high barriers to entry, single seller, and price discrimination. The profit maximize is mainly used to maximize the profits. The price maker decides the price of the good or product to be sold. High barriers to entry are used to allow other sellers to be unable to enter the market of the monopoly. The single seller in a monopoly there is one seller of the good which produces al the output. Therefore, the whole market is being served by a single company, and for practical purposes, the company is the same as the industry. Finally the price discrimination is a monopolist who can change the price and quality of the product. He sells more quantities charging fewer prices for the product...

Words: 911 - Pages: 4

Premium Essay

Monoploy

...Required reading for the final for chapter 12:Monopoly and price discrimination Market power alters the relationship between a firm’s costs and the price at which it sells its product to the market. Perfectly competitive firm takes the price as given and then chooses the quantity it will supply so that price equals marginal cost. By contrast, the price charged by a monopoly exceeds marginal cost. Important note on Monopoly It is perhaps not surprising that monopolies charge high prices for their products. Consumers of monopolies might seem to have little choice but to pay what ever the monopoly charges. But if so, why does copy of Window not cost $1000? Or $10,000. The reason, of course, is that if Microsoft set the price that high, fewer people would buy the product. People would buy fewer computers, switch to other operating systems, or make illegal copies. Monopolies cannot achieve any level of profit they want because high prices reduce the amount that their consumers buy. Although monopolies can control the prices of their goods, their profits are not unlimited. As we examine the production and pricing decisions’ of monopolies, we also consider the implications of monopoly for society as a whole. Monopoly firms, like competitive firms, aim to maximize profit. But this goal has very different ramification for competitive and monopoly firms. In competitive markets, the buying decisions of self-interested consumers and the selling decisions of self- interested...

Words: 2608 - Pages: 11

Free Essay

Imperialism Is the Monoploy Stage of Capitalism

...Imperialism is the monopoly stage of capitalism | Lenin’s assertion | | Kimani, Tabitha Wangari –X74/3507/2011 | XEA 102:INTRODUCTION TO POLITICAL ECONOMYLecturer Fred NjonyoBachelor of EconomicsUniversity of Nairobi | 27-May-12 | Thesis describes the function of financial capital in generating profits from imperial colonialism, as the final stage of capitalist development to ensure greater profits. | INTRODUCTION In order for capitalism to generate greater profits than the home market can yield, the merging of banks and industrial cartels produces finance capitalism, the exportation and investment of capital to countries with under-developed economies. Then, such financial behaviour leads to the division of the world among monopolist business companies and the great powers. Moreover, in the course of colonizing undeveloped countries, Business and Government eventually will engage in geopolitical conflict over the economic exploitation of large portions of the geographic world and its populaces. Therefore, imperialism is the highest stage of capitalism, requiring monopolies (of labour and natural-resource exploitation) and the exportation of finance capital to sustain colonialism, which is an integral function of said economic model. Furthermore, in the capitalist homeland, the super-profits yielded by the colonial exploitation of a people and their economy, permit businessmen to bribe native politicians: labour leaders and the labour aristocracy : to politically...

Words: 1291 - Pages: 6

Premium Essay

Market Competition

...allocation of resources? Give reasons for your answer. a. A perfectly competitive market is defined by the following assumptions: 1.There are many buyers and sellers 2.Firms produce a homogenous product 3.Buyers and sellers are fully informed about the price and availabilty of resorces and products 4.Firms enjoy free entry and exit from the market 5.All resources are completely mobile 6.Firms seek to maximise economic profit, and consumers seek to maximise total utility. In this market, individual participants have no control over the price, and are said to be price takers. An imperfectly competitve market is one in which firms have some ability to set their own price, and one form is the monoploy. A monoploy is a market in which a single firm is the only supplier of a product for which there are no close substitutes. Monopolies can be created by economies of scale, exclusive control of an input to production and government regulation which all pose as barriers to enter the market. Allocative effieciency can be defined as the condition that exists when firms produce the output that is most preferred by...

Words: 685 - Pages: 3

Premium Essay

Administrative Regulations

...n reference to e-book Chapter 2, problem 11 (found on e-book, p. 73), discuss the questions presented in Cases and Problems 2-11. Are there situations in which a company, for the common good, must give up the economic advantage accorded by intellectual property laws? How should the Bayer credo – Bayer: Success Through Expertise with Responsibility – impact its corporate responsibility in the anthrax situation? In your discussion, make reference to the Social Responsibility of Corporations Matrix, Exhibit 2.2 (p. 48) and the models of business ethics (found in e-book, pp. 47–49). I agree with everyone that Bayer should not think about its profit motive and help the society. What happened shows a really different picture where government partially thought about the citizens, Pls check this link http://www.corpwatch.org/article.php?id=723 .. v I believe there are times when a company needs to set aside economic advantage to help society. As good example is during war or national emergency. Usually during these times companies set aside their economic advantages to back the nation. Car manufactures start producing military vehicles and the patents they hold can make the vehicles better for societal good. Since the rules of a free market are essentially but on hold and placed under government control, the patents became less leverage. In the same sense, so should Bayer. Bayer's corporate policy seems to oriented towards the Enlightened Self-Interest as evident in the order...

Words: 1227 - Pages: 5

Premium Essay

Porter Five Forces Model

...Porter's 5 forces model is a powerful way of analysing the competitive forces that shapes every industry in general. This was developed by Michael E. Porter of Havard Business School in 1979. This tool helps you to identify whether a new product, investment, services or business have the potential to be profitable. The 5 competative forces that are taken into consideration are: Competition in the Industry Potential of new entrant into Industry Power of Suppliers Power of Customers Threat to substitute products Lets discuss each of these points in detail: Competition in the Industry: This describes the competition between the existing firms in an industry. Greater the competitive riverly (companies providing equally good products or services) lesser are the profit margin. The price of the product/services is the single most defining factor that influences the customer's buy decision. Hence to maintain low cost, companies consistently has to make manufacturing improvements to keep the business competitive. This requires additional capital expenditure which tends to eat up company's earning. On the other hand if no one else can provide products/ services the way you do you have a monopoly. Lets try to explore these points in more detail. Look at the current senario, the small car market in India is very competitive with players like Maruti Suzuki, Tata Motors, Huyndai etc. which was preety much dominated by Maruti. But with launch of Nano the 1 lakh car the...

Words: 1256 - Pages: 6

Free Essay

Gci - India, China

...A Short Report On EFFICIENCY ENHANCERS SUB INDEX (Comparison between INDIA and CHINA ) Submitted by P.Anila INTRODUCTION The Global Competitiveness Index (GCI) every year report will published by the World Economic Forum. The first report was released in 1979. The 2009-2010 report covers 133 major and emerging economies, down from 134 considered in the 2008-2009 report as Moldova was excluded due to lack of survey data. Switzerland leads the ranking as the most competitive economy in the world, as the United States, which ranked first for several years, fell to fourth place due to the consequences of the financial crisis of 2007–2010 and its macroeconomic instability. China continues its relative rise in the rankings reaching 27th. The report "assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. The WEF defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. More competitive economies tend to be able to produce higher level of income for their citizens. Global Competitiveness shows the ability of a country...

Words: 1481 - Pages: 6

Premium Essay

Microsoft Word 2007

...MARKET STRUCTURES MARKET STRUCTURE In economics, market structure (also known as market form) describes the state of a market with respect to competition. MAJOR MARKET FORMS The major market forms are: • • • • • Perfect competition, in which the market consists of a very large number of firms producing a homogeneous product. Monopolistic competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share. Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. The correct sequence of the market stucture from most to least competitive is perfect competition, monopolistic competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of producers and consumers in the market,...

Words: 4577 - Pages: 19

Premium Essay

Marketing Process

...CHAPTER 1: INTRODUCTION A. Introduction: In the era of globalization, a major global change has occurred and the world has become so competitive that companies of all over the world are trying to get over one another by being distinctive in their field. New product development process is the leverage which eases a company to do so. Consumers are now looking for new innovative products and so they demand to find a way to develop this product more quickly and effectively. Here we are discussing this new product development process according to our company’s view in launching our new product which is ‘Solar Backpack.’ About our company: Our company is renowned for supplying green products with higher quality, style and reliability. The company established in 1998 in London and since we have been continuing our service with and great reputation. In several years we achieved the market leadership in supplying green product to the major UK retailer. Now we have our own outlet established in 2006 in London. Soon, we are going to open more outlets all over UK and our aim is to provide our service in international basis. About our product: The Solar backpack is the first product in backpack line which has an integrated solar charging system retaining all the qualities of a usual backpack. It has more features comparing with a usual backpack as it a smart, effective solar charging module, multiple pockets for electronic devices, adapters and sometimes with removable...

Words: 10428 - Pages: 42

Premium Essay

International Business

...Marketing Process CHAPTER 1: INTRODUCTION A. Introduction: In the era of globalization, a major global change has occurred and the world has become so competitive that companies of all over the world are trying to get over one another by being distinctive in their field. New product development process is the leverage which eases a company to do so. Consumers are now looking for new innovative products and so they demand to find a way to develop this product more quickly and effectively. Here we are discussing this new product development process according to our company’s view in launching our new product which is ‘Solar Backpack.’ About our company: Our company is renowned for supplying green products with higher quality, style and reliability. The company established in 1998 in London and since we have been continuing our service with and great reputation. In several years we achieved the market leadership in supplying green product to the major UK retailer. Now we have our own outlet established in 2006 in London. Soon, we are going to open more outlets all over UK and our aim is to provide our service in international basis. About our product: The Solar backpack is the first product in backpack line which has an integrated solar charging system retaining all the qualities of a usual backpack. It has more features comparing with a usual backpack as it a smart, effective solar charging module, multiple pockets for electronic devices, adapters and sometimes...

Words: 10462 - Pages: 42

Premium Essay

Economics

...Economics I Chapter 1: Economics for business ‘David Begg and Damian Ward – Economics for business’ 1.1 What is economics? Economics how individuals, firms, governments and economies deal with the problem of infinite wants and finite resources, it is the study of how the society resolve the problems of scarcity. Microeconomics: addresses the various market influences that impact upon a firm’s revenues and costs. Macroeconomics: addresses the economy-level issues which similarly affect a firm’s revenues and costs. Infinite wants: limitless desires to consume goods and services (big house, luxury car, designer shoes). Finite resources: limited amount of resources that enable the production and purchase of goods and services (salary, consulting fees, royalties from book, generous friends). Factors of productions: are resources needed to make goods and services: land (oil, gas, base metals), labour (China/India or Europe), capital (machinery, computers, office spare, retail shops) and enterprise (brings land, labour and capital together and organize them into business units that produce goods and services with the objective of making a profit, like shareholders). Production possibility frontier it shows the maximum number of products that can be produced by an economy with a given amount of resources. This illustrative tool can be used to highlight crucial economic concepts: Finite resources with a fixed quantity of resources an infinite amount of beer, or pizzas, cannot be...

Words: 12239 - Pages: 49

Premium Essay

Ugodan

...Background to entrepreneurship Definition and interpretation The term enterpreneurship emerges from the french (literally between take or go between )and traceable to the eighteen century economiist Richard Cantillon ,Anne-Robert –jacques Turgot and Francios Quesnay ,The term was also denoted to an actor in charge of large –scale construction Project as cathedral, bearing no risk but simply carrying the task forward untill resoures were Exhausted ,the change in the use of term began in the seventeen century with a specific reference to risk bearing and enterpreneurship was tagged a person who entered into a contractual relationship with the government for the performance of a service or the supply of good ;The assumption was the price of a contract had been valued and fixed and the enterpreneur bore the risk of profit and loss from the bargain. In the eighteen century ,the term was applied in france in several way ; cantillon in 1725 referred to entrepreneurs as risk bearing .But he tried to differentiate the entrepreneurs who provide capital or funds from those who relied on their own labour and resources. That showed an entrepreneurial role as independent of the capitalist role Quesnay considered an enterpreneur as a tenant farmer who rent property at a fixed rent and produces a given price’s like cantillon bandeau ( 1797) and Turgot...

Words: 15789 - Pages: 64

Premium Essay

Economics

...‘Market Efficiency’ PowerPoints and Activities 2008/20144[2] ‘Market efficiency’ PowerPoints and activities 1 Content The documents in this section provide support material for the stage 2 units. Document 1. Covers A sample program for stage 2 which covers unit 2AECO in the contexts of options from Economics D304 Sample lesson outlines for Business firms and markets–Unit 2AECO Notes and PowerPoint slides on Market efficiency and equity—Unit 2AECO A range of teaching and learning materials covering the concepts of Market efficiency and equity for the 2AECO unit and some applications of these concepts: 4.1 4.2 4.3 4.4 4.5 4.6 4.7 The Sundance film festival—A case study with suggested answers PowerPoint slides—Efficiency and equity, concepts and applications PowerPoint companion—Efficiency and equity, concepts and applications Extension activities—The concepts of efficiency and equity Extension activities discussion topics Emissions trading schemes (ETS) Review Questions—Efficiency and Equity, with suggested answers 2. 3. 4. 2 ‘Market efficiency’ PowerPoints and activities Document 1: Sample program for Stage 2 The purpose of this document is provide an example of how the Stage 2 units can be programmed by drawing on four of the Options from the Economics D304 subject and using them as contexts for unit 2AECO. In this sample program the options from D304 drawn on to provide contexts are Australian market forms, Firms and production and Environmental...

Words: 21047 - Pages: 85

Premium Essay

Study Habits

.... Organization Theory Challenges and Perspectives John McAuley, Joanne Duberley and Phil Johnson . This book is, to my knowledge, the most comprehensive and reliable guide to organisational theory currently available. What is needed is a text that will give a good idea of the breadth and complexity of this important subject, and this is precisely what McAuley, Duberley and Johnson have provided. They have done some sterling service in bringing together the very diverse strands of work that today qualify as constituting the subject of organisational theory. Whilst their writing is accessible and engaging, their approach is scholarly and serious. It is so easy for students (and indeed others who should know better) to trivialize this very problematic and challenging subject. This is not the case with the present book. This is a book that deserves to achieve a wide readership. Professor Stephen Ackroyd, Lancaster University, UK This new textbook usefully situates organization theory within the scholarly debates on modernism and postmodernism, and provides an advanced introduction to the heterogeneous study of organizations, including chapters on phenomenology, critical theory and psychoanalysis. Like all good textbooks, the book is accessible, well researched and readers are encouraged to view chapters as a starting point for getting to grips with the field of organization theory. Dr Martin Brigham, Lancaster University, UK McAuley et al. provide a highly readable account...

Words: 230271 - Pages: 922