Premium Essay

Monopolies and Ogopolies

In: Business and Management

Submitted By sske50
Words 306
Pages 2
Monopolies are at the other end of the spectrum from perfect competition in terms of the number of sellers and degree of competition. A monopoly has only one seller in the market and perfect competition has numerous small companies and none can control prices. They accept market price as determined by supply and demand. Since the government limits monopolies in the U.S., there are few. Natural and legal monopolies are two categories that most fall in to. Gas and electric utilities are considered natural monopolies. Although competition is inhibited, we need the services they provide and as long as they agree to government regulations, they can operate as a monopoly. When a firm is granted a patent giving it exclusive use of an invented product or product, it is called a legal monopoly. Patents are generally given twenty years in which time other firms is prohibited from using the product or process without permission. This gives firms times to recoup monetary loss from researching and developing the products. Monopolistic competition has multiple sellers just as perfect competition does. They sell differentiated products which are products that are somewhat different that serve a similar purpose such as Coke and Pepsi, rather than identical products. Monopolistic competition has little control over prices. Oligopolies have few sellers. An oligopolistic market has each seller supply a large part of all products sold in a marketplace. Because starting a business in an oligopolistic industry is mostly high, firms entering the industry are low. Large-scale firms such as airlines and auto companies are oligopolistic industries. Because these firms supply huge portion of the market, the firms have some control over prices charged. But because the market products are similar, if a firm lowers prices, the other firms are often forced to do the

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