Monopoly refers to there is no competition and therefore the provider has a really high grade of pricing power. In add-on, monopoly besides is a state of affairs in which a individual organisation or group owns all or about all of the market for a given type of merchandise or service. Besides, it besides contains several characteristic, illustration and diagram in monopoly market.
In add-on, there are four common types in competition free market which is perfect competition, monopolistic competition, oligopoly and monopoly. There are different significance, characteristics and illustrations in these four common types in a market.
A monopoly is when there are many purchasers but there is merely one marketer that controls the supply of a merchandise and its monetary value. This allows the provider to bear down higher monetary values than if there was competition. Burkett, John P. ( n.d, pg345 ) states that if a merchandise has no close replacements and a individual marketer, economic experts say that its market is a monopoly and its marketer is a monopolizer. Monopoly is like a market construction in which one company sells a particular goods into which entry is blocked in which the individual company has considerable control over the merchandise monetary value. So, consumers have no pick to purchase their merchandise and service. There is few authorities bureaus keep the formation of monopoly under control, particularly in markets such as overseas telegram companies like Tenaga National and media.
2.1Characteristics of Monopoly
Monopoly market construction is selling the merchandise which has no close replacements with others. The features of a monopoly market are as follow:
There is merely one marketer in a monopoly market. The marketer controls the supply of a merchandise and decides the merchandise monetary value. Besides, a monopolistic besides control over the full market because there is a individual peculiar services in the market obtain a batch of buyers
2.1.2 Unique Product without near replacements
In a monopoly market, their merchandise and service are particular and alone. They have their ain thought and design for the merchandise and service. All the units of a merchandise are similar and there are no alternate to that trade good in the house. The house are commanding over the market by offering a merchandise that is non same with other. The house may utilize specialised information like hallmark and right of first publication in order to set up legal authorization over the production of some goods and services.
2.1.3 Barriers to Entry
Normally, monopoly state of affairs in a market can go on merely when other company does non come in into the industry. In a monopoly market, they have no others competitor because barriers of enter are really strong. It would be prevent and discourage to come in this market to be a rival. Therefore, a monopoly presents barriers to forestall possible rivals from come ining the market. The barriers may even be legal in that the house to take benefit of right of first publications, duties and trade limitations and others. If want continue the monopoly market should non be no entry for new houses.
2.1.4 Net income in the Long Run
The marketer can gain more net income as he can if there is no any fright of competitory marketer in the monopoly market. In other manus, if the marketer gets unusual net incomes in the long term, he can non be merely discontinue from this market. However, this is impossible under perfect competition. If unusual net incomes are available to a competitory company, other companies will come in the competition with the consequence unusual additions will be eliminated.
2.1.5 Lack of Competition
When the market demand to function like a monopoly, the deficiency of concern competition are the best benefit for the monopolistic. They besides need to barriers to entry for guarantee other houses non easy come in the market running their concern. For illustration, overseas telegram companies are the monopoly in market. They control all the supply of the merchandise and a batch of purchasers.
2.2Diagram of Monopoly
Since there is merely one manufacturer in monopoly, the company ‘s demand curve represents the industry demand curve. The demand curve for a monopoly house is downward sloping, which shows the mean gross or monetary value for every unit of end product sold. Fringy gross is extra in entire gross from selling one more unit. Entire gross is the monetary values multiply with measures. The graph shows a additive demand curve and MR curve.
For illustration, if the measure ranges from 0 to 5 units of overseas telegram Television, the MR is positive ( MR & gt ; 0 ) and demand is elastic where monetary value lessening will increase the TR. At the measure of 5 units of overseas telegram Television would take to negative MR ( MR & lt ; 0 ) and this scope the demand is inelastic because bead in monetary value would diminish the TR. TR is maximized when MR is zero.
2.3 Decision of Monopoly
In decision, monopoly is merely a marketer but many purchasers in a market. A monopolizer is selling alone merchandise and the design and thought create by his ain. The marketer is ‘price shaper ‘ , he decided to put the merchandise monetary value and maximise the net income. Therefore, monopoly is an absence of competition, which frequently consequences in high monetary values. Besides, a monopolistic besides needs to command some company no entry in monopoly market because some houses are strong to take advantages in your company.
3.0 Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly
There are several market constructions in which houses can run. The type of construction influences the house ‘s behaviour, whether it is efficient, and the degree of net incomes it can bring forth. Perfect competition means that has a market state of affairs in which a batch of Sellerss or manufacturers bring forthing and selling homogenous merchandise. Monopolistic competition is which there are many houses selling differentiate merchandises in a market. In add-on, oligopoly is market construction in which there are a few independent companies and monopoly is the lone one marketer in the market and command the full market.
3.1 Difference between the Features of Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly
Number of Sellerss
Difference between merchandises
Undifferentiated or Differentiated
Freedom of entry
Restricted or wholly blocked
Ability to put monetary value
Fast Food Burger Companies
Soft Drink Companies
3.1.1 Number of Sellerss
Perfect competition refers to exists when there are a batch of Sellerss in a market and do non hold big marketer to find the merchandise monetary value and monopolistic competition is when a major figure of Sellerss produce goods that are really similar but are perceived by buyer are different. In an oligopoly market, there have at least two and more houses commanding the market while monopoly means that there are many purchasers but merely one marketer controls the supply of a merchandises and its monetary value. The best illustration of perfect competition is farming and fast nutrient Burger companies like MCD are the illustration of monopolistic competition. Besides, illustration of oligopoly is coke which has many types like Coca Cola, Pepsi and Cola Turka while the illustration of monopoly is Microsoft.
3.1.2 Difference between merchandises
This is homogenous merchandise in perfect competition. The merchandises offered for sale are perfect replacements of one another and besides must identical in every regard to all Sellerss. Under monopolistic competition, merchandise distinction allows houses to bear down a high monetary value and roll up some net incomes. In oligopoly that are provided homogenous or differentiated merchandises while monopoly market are no close replacements, because the monopolistic create and design the merchandise by their ain. For case, farming such as organic veggies and some tropical fruits are the illustration of perfect competition and KFC and Burger King are the illustration of monopolistic competition. Besides, cars, banking and crude oil are the illustration of oligopoly. Cable companies such as media and electricity like Tenaga Nasional or Pos Laju are the illustration of monopoly.
3.1.3 Freedom of entry
By and large, there is free entry and issue in perfect competition and monopolistic competition. If have any barriers to entry for new houses and monetary values are decided by supply and demands. Companies in an oligopolistic market obtain and retain market control through barriers to entry. The noted of entry barriers are sole resource ownership, other authorities limitations, high start-up cost and right of first publications. Besides, monopoly is non let other houses to entry and run their concern in the market. For illustration, if a house wants to sell tropical fruit in this land, it must hold resources, labour and money to run the concern. If the concern was earned less net income, the marketer can go out the market without any limitations. The illustration of monopolistic competition is if a company wants to entry aluminium industry, the house must happen different quality, trade name name and design of the aluminium to run the concern in this market.
3.1.4 Ability to put monetary value
Perfect competition is non able to put monetary value because the monetary value is depending on the market monetary value. Therefore, provider and purchaser are non allowed to alter the monetary value. For illustration, the monetary value of the mineral H2O is set by supply and demand is $ 1 per bottle. So, all Sellerss and purchasers already know the merchandise monetary value and can non alter it. In add-on, under monopolistic competition, Sellerss can alter the monetary value if they want. This is because there are similar merchandise but different trade names name, quality and design of the merchandise. Therefore, marketer can alter the monetary value of the merchandise without influence the full market. For illustration, chicken rice in normal eating house is merely sell $ 3.50 per home base but in Chicken Rice Shop Restaurant is selling $ 8.90 per home base. This is the different between the quality and design of the merchandise. Under oligopoly, it is a market most depend on strategic. When one marketer lowers the monetary value of the merchandise, another concern of oligopoly besides will follow to take down the monetary value of the merchandise. However, because there are rival houses, oligopolies must attending at how they react to its alteration in monetary value, end product, merchandise or advertisement. For illustration, if F & A ; N Soft Drink Company increases the monetary value of the soft drinks, other soft drink companies will besides follow to increase the monetary value. Besides, monopoly able to put the monetary value of the merchandise because monopolistic is a price-maker. This is because there is merely one marketer in the market and decides the monetary value of the merchandise. Therefore, consumers have no pick and demand to utilize their merchandise and service. For case, Telekom Malaysia Bhd a„? is increase the speaking clip of place telephone to home telephone to RM0.50 sen per minute, so all users need to accept and follow the monetary value by authorities because monopolistic is monetary value shaper.
3.2 Decision of Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly
In decision, the construct of market construction is cardinal to both economic sciences and selling. Besides, there are difference characteristic in these four common types of market construction which is perfect competition, monopolistic competition, oligopoly and monopoly. Perfect Competition which is many Sellerss of a standardised merchandise, Monopolistic Competition which has many Sellerss of a differentiated merchandise, Oligopoly has few Sellerss of a standardised or a differentiated merchandise, and Monopoly which is a individual marketer of a merchandise for which there is no close replacement.
These four market structures each represent an abstract ( generic ) word picture of a type of existent market. Market construction is of import in that it affects market outcomes through its impact on the motives, chances and determinations of economic histrions take parting in the market.
4.0 Decisions and Recommendations
In decision, after complete these two undertakings, I gained excess cognition about the item of monopoly and it ‘s characteristic. In a monopoly market merely has one marketer running the concern in full market. Therefore, there is no competition with others. A monopolistic besides needs to guarantee no barriers to entry of other companies.
In add-on, free market construction is the competition that comes from leting anyone who needs to sell a peculiar service or point to make so. Under market construction at that place have four common types which are perfect competition, monopolistic competition, oligopoly and monopoly. There are different market with different features and illustrations.