...There are various ways in which governments can intervene to abolish monopolies. A monopoly can be used in different ways and there are two types of monopoly. A monopoly is a market dominated by one firm whereas a pure monopoly is one firm only in a market, an example of a monopoly would be Microsoft. Governments abolishing monopolies enable firms to compete with one another; this therefore increases businesses and allows more firms in a market. By abolishing monopolies it could increase smaller firms to increase in size, by doing so would create more job applicants leading to less unemployment and by a firm increasing in size, the average total cost per unit to make would decrease. We can demonstrate this by using an average total cost curve. Another advantage would be that monopolies often produce goods and services at a small level and price it high, monopolies can do this because the lack of competitors in the market, so by eliminating the monopoly, the goods and or services will be produced at a high quantity and prices will be set lower. Although abolishing a market can have its positives to other, smaller firms but it also comes with disadvantages. With multiple firms in the market both operating at the productively efficient point they become perfect substitutes for one another causing firms to lower their prices in order to compete with the other firms. By doing this they hope to achieve an incentive to the consumer in order for them to consume their...
Words: 417 - Pages: 2
...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...
Words: 1146 - Pages: 5
...industry) behave in terms of pricing, supply, entry & exit, competition and efficiency. Currently, there are four types of market structures practiced in the world. These are: 1. Perfect Competition 2. Imperfect or Monopolistic Competition 3. Monopoly 4. Oligopoly These market structures are as a result of the different degrees of competition within the industry. Each structure is differentiated by freedom of entry and exit, number of buyers and sellers, product differentiation, etc. However, each market structure has got its advantages and disadvantages. Below are some of the advantages and disadvantages of each market structure. Perfect Competition In a perfect competition market structure, there is freedom of entry and exit, products are homogeneous, there is a large number of buyers and sellers, and in this market structure firms are price takers. Examples include Financial markets and Agricultural markets. Advantages 1. There is most efficient use of resources, due to a high degree of competition 2. The consumer benefits 3. Price is usually equal to marginal cost 4. Normal profit is made in the long run (i.e. over time) 5. Firms operate at Maximum efficiency. Disadvantages 1. With introduction of a new idea, firms can make abnormal profit over a short term period Oligopoly Market An oligopoly market has a small number of firms, which are all...
Words: 729 - Pages: 3
...Assignment 4: A Horror Show at the Cinemaplex Jeffrey Evans BUS 499 Prof. Michael Petty 05/26/2012 Abstract If the motion picture industry’s performance in 2007 were a feature presentation, the marquee would read “Massive Box Office: Smashing Records the Sequel!” At $9.63 billion, box office revenue set another record in 2007, a full 5 percent above the record set in 2006’s.1 An astonishing 1.4 billion tickets were sold in 2007. But beyond the headlines, the industry is a study in contradictions: the number of theaters is declining, but the number of screens is at an all time high revenues are up, but attendance is largely flat – that 1.4 billion tickets is little improved from 1997 when 1.35 billion tickets were sold and a fraction of the 4 billion sold in 1946. Then the average person attended 28 films a year, today it is 6.2 the U.S. population is increasing, but the size of the market in the core demographic group is growing more slowly Americans spend more time than ever on entertainment – 3,500 hours annually – but only 12 are spent at the movies.3 The average person spends as much time watching TV every 3 days. Movies remain as popular as ever, but opportunities for viewing outside the theater have greatly increased. While motion picture studios increased revenues through product licensing, DVD sales, and international expansion, the exhibitors – movie theaters – have seen their business decline. Movies are more available than ever, but fewer are venturing to...
Words: 1471 - Pages: 6
...Microsoft Antitrust Investigation……………………………………..page 2 Market Structures……………………………………………………..page 3-4 Disadvantages of Monopoly Market………………………………….page 4 Advantages of Monopoly Market…………………………………….page 4-5 Conclusion…………………………………………………………….page 5 References…………………………………………………………….page 6 Introduction The purpose of this paper is to identify an antitrust investigation for a firm, to discuss the reason for the investigation, and the impact its impact on the firm. The paper also identifies the practices and power of monopoly and oligopoly market structures. It also discusses the advantages and disadvantages of monopoly market. Microsoft Antitrust Investigation According to CNN Money News, the European Union found Microsoft guilty of breaching a 5 years commitment to providing EU customers a choice of browser (Thompson, 2013). This verdict came after an antitrust investigation of the company. Antitrust law is one that was put into place to help foster competition in market and to prevent large companies from breaching these agreements. In the case of Microsoft, the EU utilized the Clayton Antitrust Act of 1914. McConnell and Campbell (2012), describe this Act as one that outlaws techniques that firms use to develop monopoly power. The EU ruled that Microsoft’s behavior did give customers a choice thereby decreasing competition. Microsoft like Google operates under a monopoly market system meaning that they have increase market power and have significant control on their market...
Words: 1048 - Pages: 5
...Market structures In this part of the report I will explain the different type of market structures I will give advantages and disadvantages for all and how they have direct relationship with pricing and output decisions. Monopoly A monopoly in the market structure controls the industry; it is the one and only business in that industry. The entry barriers are very high a somewhat impossible to get in and out of, they have no competition so can set quite high prices depending on the demand for the product and set government regulations. Advantages for Monopoly is the business can make huge profit but as this would be an advantage for the business this would also be a disadvantage as they have control over pricing they will set high prices for their product or service, as it is only the one in business in the industry there is little to no change or new products brought in to the industry. The direct relationship monopoly has with pricing and output decisions as it can set high prices the prices also change regular as the demand for the product changes as the demand goes down prices go up and as the demand goes up the price go down. Oligopoly Oligopoly in the market structure is a few businesses that control the industry; the market is shared between those businesses. The entry barriers are high and is difficult to enter the industry but not impossible. They sell identical or similar products so have to think of their competition when it comes down to pricing of their product...
Words: 648 - Pages: 3
...Market structure refers to the interchanging characteristic of the market. These aspects are able to influence business decisions by altering the marketing mix and business strategies such as pricing, competition, efficiency and supply. Although there are many features within market structures it could be argued that the numbers of firms is the most important as it relates to scales, extent of foreign competition, the nature of the demand curve, freedom of entry to industry and the nature of product. The main four market structures are prefect competition, monopoly, oligopoly also known of duopoly and monopolistic competition. Perfect competition is a market structure that has many firms that have no barriers to entry. It is easily accessible for new/ start-up companies, as they would have no problems with joining while producing a standardized product. Pricing is normally relatively low as most companies would not have the resources or capital to expand or develop the product. Start-up sole traders, such as convenience stores, are typical examples of perfect competition businesses. For such businesses being part of this environment is an advantage as high levels of competition can increase efficiency through the use of resources benefiting both the business and their customers. However due to the nature of the market, most companies are small so capital is limited, limiting how much the business can do making it harder to expand and grow within the market. Monopolistic...
Words: 1193 - Pages: 5
...In this essay I have analysed the different types of competition and market structures, and linked this to a current world example. I’ve discussed the neo-classical and dynamic approaches to competition and have studied Michael Porter’s Five Force model. Systemic and structural competitiveness has been mentioned, and market economies are examined including technical and allocative efficiency. I have assessed the relationship between competition and the business environment, and finally given personal views and come to an argued conclusion. Competition is the process by which two or more firms compete in the same market for a larger market share. This rivalry that exists is very beneficial to firms as is leads to increased efficiency and higher output at given cost levels. The amount of competition in a market is measured using concentration ratios (e.g. the five firm concentration ratio). There are two different types of competition which firms may undertake, price competition and non-price competition. In price competition, firms compete on the basis of price, for example by increasing the price of a good or service, the demand will either increase or decrease accordingly depending on its price elasticity of demand. In non-price competition firms compete in less risky forms of competition other than price, such as advertising and branding. Non-price competition exists in imperfect competition (usually oligopolies). Imperfect competition occurs in situations when there are...
Words: 1070 - Pages: 5
...economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both privately-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and planned economy characteristics. This system overcomes the disadvantages of both the market and planned economic systems. Features * Resources are owned both by the government as well as private individuals. i.e. co-existence of both public sector and private sector. * Market forces prevail but are closely monitored by the government. Advantages * Producers and consumer have sovereignty to choose what to produce and what to consume but production and consumption of harmful goods and services may be stopped by the government. * Social cost of business activities may be reduced by carrying out cost-benefit analysis by the government. * As compared to Market economy, a mixed economy may have less income inequality due to the role played by the government. * Monopolies may be existing but under close supervision of the government. http://www.dineshbakshi.com What Are The Advantages And Disadvantages Of Mixed Economy? The mixed economy refers to such an economic system wherein two the sector exist and function for achieving national objectives. The two sectors are the public sector and private sector. Both these sectors exist and function for achieving national objectives. Both these sectors make the economic...
Words: 1830 - Pages: 8
... Debate Are government controlled monopolies better than perfectly competitive markets? yes government controlled monopolies are better than perfectly competitive markets:- 1. The reason that governments tolerate monopolies is because they are also one themselves. They have ultimate monopolistic control and the legitimate use of power and force. Whether it’s criminal justice, police, military or mail almost all government agencies function as a monopoly. They also like to give out monopoly favor to some of their well connected friends. 2. Monopsony power. A firm with monopoly selling power may also be in a position to exploit monopsony buying power. For example, supermarkets may use their dominant market position to squeeze profit margins of farmers. source:- http://en.wikipedia.org/wiki/Government_monopoly no government controlled monopolies are not better than perfectly competitive markets:- 1. I think the formation of monopoly is very important , especially during the time of recession. They can push out infant firms and became internationally competitive. The fact that they have an EOS can reflect cheaper prices of their products. However they have to earn abnormal profits , therefore they have to minimize total costs , to do that they have to pay less to their employees. That is the only disadvantage. 2. A monopoly is allocatively inefficient because in monopoly the price is greater than MC. P > MC. In a competitive market...
Words: 272 - Pages: 2
...purchase private health insurance if they so choose. In the US, the majority of citizens have health insurance that is related to employment or purchases directly. The federal government only ensures public access to emergency services, regardless of an individual's ability to pay. They also have publicly funded health care programs that cater to the elderly, the disabled and the poor. These are two significant examples of the two different approaches to health care provision: publicly and privately funded. In this report, we are going to look into the microeconomic aspects of the two models by assessing and analysing: Health care features as policy interventions in the market The microeconomic advantages and disadvantages of the UK system The microeconomic advantages and disadvantages of the US system The role of the regulators and markets in the provision of health care Key Findings Health care features as policy interventions in the market In the majority of advanced societies, access to basic and emergency health care is considered an irrefutable moral right, regardless of gender, age or creed. But through what means should a government decide it has the right to control any health care system via administration and policy? Both systems contain state owned entities which provide free health services, funded by the taxpayer, although the limitations on state services differ greatly, defining the private and public services. By its very nature, a state owned entity requires policy interventions...
Words: 668 - Pages: 3
...concepts and measurement of gross domestic product, unemployment, and inflation. Understand and describe the difference between business cycles and economic growth and the factors that contribute to each. Page 1 of 6 Understand and describe the concept of Macroeconomic Equilibrium. Understand and describe how Aggregate Demand and Aggregate Supply determine equilibrium price and output in the short-run and long-run. Understand and describe the multiplier concept, how it is computed, and its qualifications and limitations. Analyze and describe the concepts, tools, and implementation of fiscal policy, its limitations and relative advantages and disadvantages, and how it affects aggregate economic activity. Understanding the concepts, tools, and implementation of monetary policy, its limitations and relative advantages and disadvantages, and how it affects aggregate economic activity. Pedagogy Course will be delivered through a combination of different methodologies, like – Lectures, Readings, Simulation, Case studies etc. Nucleus & ERP All course related communication will...
Words: 1389 - Pages: 6
...Potato Chip Monopoly 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. In this paper I will discuss how the new company being run as a monopoly will benefit the stakeholders involved, such as the government, businesses, and consumers. Then I will discuss the transition from a monopolistically competitive firm to a monopoly, and what will be the changes with regard to prices and output in both of these market structures. I will also discuss which market structure is more beneficial for Wonks to operate in, and whether it will be the same market structure that will benefit consumers. A monopoly is, "an industry composed of only one firm 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 et al, 2009, p. 254). A monopoly is constrained by market demand and has to produce things that people want in order to be successful. A monopoly must be careful with how they set their price and their quantity of output. They cannot set their prices too high or...
Words: 1670 - Pages: 7
...Title: THE ECONOMY, MONETARY POLICY, AND MONOPOLIES Name: Jackie Harris Professor: Horvath Course: ECO 100 (Principles of Economics) Date: 12/02/2012 Analyze the current economic situation in the U.S. as compared to five (5) years ago. Include interest rates, inflation, and unemployment in your analysis. “The United States economy is the largest national economy in the world; it is a market orient economy with a GDP (purchasing power parity) of 15.08 trillion dollars in 2011.” (www.cia.gov/worldfactbook). The economy of the United States is continually growing, at present it has a “GDP growth rate of 1.8%.”(www.cia.gov/worldfactbook). Though, the economy is still in recovery from the recession, in my opinion, it is doing far better now than it was in 2007 and 2008 because of the recession. “Currently the unemployment rate in the U.S is estimated to be 9%.”(www.cia.gov/worldfactbook). Which is still high when compared to previous years, but that is due to the current economic situation in the country. However, according to the National Bureau of Economic Research website, the recession began in December 2007, and was spurred by “sharp downturns in U.S. stock, housing and labor markets” (http://www.nber.org). As a result of the economic recession in America, there were not only ramifications for the United States economy, but for the people as well, and ultimately the global economy. The...
Words: 1420 - Pages: 6
...Economics Help free Revision Guide. If you find this revision guide useful, the author would appreciate a donation which you can make via www.economicshelp.org/blog/donate It is not permissible to copy this guide for others. It is only freely available from www.economicshelp.org/ You are welcome to leave feedback and ask further questions on Economics at: www.economicshelp.org/blog Richard Tejvan Pettinger 29 Campbell Road mail@richardpettinger.com www.economicshelp.org 2 AQA Edexcel OCR • • • • • • • • • • • • • • • • • • Unit 5 Unit 4 Unit 4388 Costs Law of Diminishing Returns Economies and Diseconomies of Scale Production Decisions The Objectives of Firms Efficiency Competitive Markets Oligopoly Contestable Markets Monopoly Competition Policy Price discrimination The Labour Market Poverty and Alleviation of Poverty Market Failure Cost Benefit Analysis Privatisation Regulation of Privatised Industries www.economicshelp.org 3 Costs • • • • • • • • Fixed Costs: Variable Costs: Total Costs: Marginal Cost: Sunk Costs: These are fixed costs that do not vary with output. E.g. cost of building a factory These are costs that do vary with output E.g. electricity, raw materials Fixed + variable costs This is the cost of producing an extra unit These are costs that are not recoverable e.g. advertising = = = TC / Q VC / Q FC / Q Average Total Cost (ATC) Average Variable Cost (AVC) Average Foxed Costs (AFC) The Law Of Diminishing Marginal Returns • • •...
Words: 6402 - Pages: 26
