Assignment On Economics | Monopoly

Running Head: ECONOMICS 1
ECONOMICS
Name
Institution

Running Head: ECONOMICS 2
Monopoly
Predominantly, there are four market structures globally. Namely, monopoly, monopolistic
competition, oligopoly and perfect competition. Monopoly refers to a market structure where
there's only one supplier of a good or service in an industry. Specifically, monopolies are
characterized by one seller with many buyers. In a monopoly, the product or service has no close
substitute hence no competition in the industry in the sense that the product or service being
availed by the monopoly firm is distinctly unique thus fending off any potential
competition. .Usually, monopolies have very high entry barriers which make it impossible for
upcoming firms to enter the industry thus maintaining the market share by that one producing
firm(Agarwal,2017).The entry barriers could be in the form of infrastructure ,capital technology
factors which give a monopoly control over the industry.
Further ,under a monopoly market structure ,the monopoly which is considered the firm
and the industry because it is one and the same thing ,decides on the price of the goods and
services it is offering.in this scenario ,the monopoly controls the supply of the good or service
thus has the power to decide what price to charge for its product or service.in this
scenario ,consumers are price takers(Agarwal,2017.)Unlike perfect competition, monopolies are
able to make supernormal profits .A real life example of a monopoly in the Nepalese economy ,is
the Nepal Oil Corporation which avails all and petroleum products to the citizens of Nepal. The
Nepal Oil corporation is responsible for the supply and price of oil and petroleum products in
Nepal due to the fact that it is the only supplier and the price maker of Nepalese oil products.
Luxxito is a monopoly due to the fact that it produces the largest volume of glasses in the
world(Chirila,2015).Other Monopolies include Netflix, Unilever and Monsanto .Specifically

Running Head: ECONOMICS 3
Monsanto is Corn Product company whereas Unilever deals in food based products and home
care supplies.
Monopolistic Competition
Notably, under monopolistic competition, there are many firms operating in the
industry offering similar types of goods or services in the industry that is to say goods and
services produced by these different firms have substantial similarities and close substitutes of
the other but not identical .Due to the existence of many firms in this industry ,there's
competition between the existing firms unlike monopolies. In addition ,under monopolistic
competition ,there exist low entry barriers into the industry thus making it easy for upcoming
firms to enter the industry without much hustle(Investopedia,2017).Due to the existence of many
firms in the industry, firms under monopolistic competition ,there’s no chain reaction or strategic
behavior of individual firm decision to the rest of the industry .Most oligopolistic firms are found
in the transport sectors ,taxi firms such as Uber, Hairdresser enterprises, dry cleaning business
ventures e.t.c.(Tutor2u,2015)
Typically ,there's product differentiation under monopolistic competition due to the purpose
similarity of goods and services under this industry.Moreover,there s need for marketing for
firms under this market structure prompted by the need to differentiate their products for their
customer base(Investopedia,2017).firms in this industry are price setters(Boundless,2017).Gas
stations such as Total Group of companies is a perfect living example of monopolistic
competition. The gas industry has several dominant players in the industries globally (Lipovsky,
2017).Hotel industries ,Automotive companies and pharmaceutical enterprises are perfect
examples of monopolistic competitions in various economies.

Running Head: ECONOMICS 4
Perfect Competition
Categorically,perfect competition is characterized by the existence of many firms in the
industry.Further,these many firms are responsible for availing similar homogenous goods and
services that is to mean,the product or service is similar in nature.Moreover,firms in a perfect
completion face no entry barriers into the industry thus there s competition which translates to
consumer choice.The existence of many firms producing same products affords the consumer a
variety of goods and services as opposed to monopolies.Also,firms under this market structure
are price takes as contrasted to monopolies who are price setters for their goods and
services(Tejvan,2016).Ideally,perfectly competitive firms are the ideal market structure due to
the fact that under perfect competition,there's free entry and exit of firms,many firms which
imply a variety of goods for consumers and the fact that consumer welfare is achievable under
this industry.
Notably,perfect competition firms are considered allocatively efficient due to the fact that the
prices for goods and services is equal to the marginal cost incurred in production.For
instance,forex exchange enterprises are considered an example of perfect competition
firms.under perfect competition,the resources allocated are equal to the quantity of goods
supplies to the market unlike monopolies whereby the quantity of goods supplied might be less
than the price charged for the very same goods.Similarly,monopolistic firms are likely to
produce less or more goods but charge greater prices.Under oligopolies and monopolistic
competition,the price of goods is usually greater than the marginal cost of goods.For a firm to
incur profits the average cost of production ought to be less.Oligopolies are likely to produce
more goods and charge relatively low prices due to the presence of many producers in the market
structure or industry.

Running Head: ECONOMICS 5
Oligopoly
Typically,Oligopoly is a market structure characterized by few firms in the industry
producing a good or a service thus the assertion that an oligopoly is a highly concentrated
industry.Usually,oligopolies are composed of a few dominating firms due to the fact that these
existing firms face little competition from other firms,if any .Firms under oligopoly market
structure exercise interdependence that is to mean that one firm decision directly affects the
decisions of the other firm in the industry(Investopedia,2017).This is to me ,when one firm
changes its price, other firms in the industry are equally going to change their price for goods and
services hence the interdependence on each other. Additionally, oligopolistic firms practice
strategy which implies that where there is a price or operation change on the part of one firm in
the industry, other firms are likely to respond to their action or omission.
Similarly, under oligopoly, there are substantial entry barriers into the industry like
monopolies. Through these entry barriers, oligopolies are able to maintain their dominance over
other small firms in the industry. However, barriers of entry are higher for monopolies than
oligopolies. Under oligopolies ,the entry barriers could be high startup capital ,research and
development expenditure and control of natural resources. Current oligopoly examples include
airlines and automotive manufacturers.For Instance in the United States of America ,the notably
oligopolistic firms in the automotive manufacture industry include the Ford group,Chrysler and
GMC.In the mass media industry ,the major players are Walt Disney,Time Warner Group of
companies ,CBS Corporation ,NBC ,Viacom Among other mass media
companies(Investopedia,2017).

Running Head: ECONOMICS 6
Perfect competition and monopolistic competition are composed of many sellers as compared
to oligopoly and monopoly. Also, there's freedom of entry and exit into the industry under
perfect competition and monopolistic competition unlike monopolies and oligopolies.Under
oligopolies ,products could be homogenous or differentiated whereas under monopolistic
competitions goods are differentiated but identical in nature .However for monopoly goods lack
close substitutes while homogenous products do exist in a perfectly competitive market structure.
There exist various real life oligopolistic firms .For instance the telecommunication industry in
most economies is oligopolistic in nature. Among the dominant players in the telecommunication
market are Apple, HTC, Nokia , Samsung and LG among other players(Livosky,2017).In most
economies,telecommunication firms are oligopolistic in nature.
Profits, Short and Long Run
Primarily, monopolistic firms achieve supernormal profits when marginal costs are equal to
marginal revenue. Such firm s are able to make profits in the short run, however there will be a
decreased demand in the long run thus the need to advertise more causing an increase in the
average cost and decreased demand. There will be surplus produce in the long run .Consequently
,monopolistic firms will make economic profits