Comparative Analysis of Market Structures: Neoclassical & Austrian

This essay provides a comprehensive analysis of market structures, with a particular focus on contrasting neoclassical and Austrian monopoly theories. It begins by exploring the different types of monopoly, including Neoclassical, Mises, Rothbard, and Kirzner, highlighting their varied perspectives on the subject. The essay then critiques the use of perfect competition as a benchmark, arguing against its relevance due to the lack of entrepreneurial activity and product variety. Furthermore, the role of consumers in influencing market structures is examined, with consumer preference being identified as a key factor in the creation of entry barriers. Finally, the essay discusses Rothbard's view on the limitations of restricting entry into an industry, and the role of government in creating monopolies. The assignment draws on multiple sources to support its arguments.

Running head: MARKET STRUCTURE
Market Structure
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Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................3
Answer 4..........................................................................................................................................3
Reference.........................................................................................................................................4

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Answer 1
There are four types of monopoly namely Neoclassical, Mises, Rothbard and Kirzner. All
these types of monopoly has represented monopoly in different ways. Neoclassical monopoly is
the idea of monopoly that discusses general theory of monopoly which is popular among all. It
states the monopoly firm maximizes profit my equating marginal revenue and marginal cost and
the price charged by the firm is much higher than the equating point between marginal cost and
marginal revenue. The monopoly theory of Mises is completely different from the Neoclassical
idea of monopoly. Mises states that monopoly firm is the firm that has control over supply of
commodity of the industry such hat no other firms could enter in the industry but the price in
monopoly of Mises is lower than in the Neoclassical ones (Söderbaum, 2019). This happens
because the supply of commodity are restricted. As per Mises theory of monopoly, it can be said
high price of monopoly only occurs when government intervention occurs. Apart from that,
prices could increase if there is monopoly on natural resources and geographical area. On the
other hand, Kizner gave the notion of another different type of monopoly where the a single firm
having control over all the resources in the industry such that no other firm has the access to the
resources and forced to remain outside the industry or to invest in other industries where there is
scope. Thus, this blockade in entry of other firm in the industry give rise to monopoly structure.
Finally, the fourth type of monopoly is the Rothbard’s Monopoly. It states that, there could be
three kind of monopoly and that may form due to single firm in industry, monopoly allowed by
the government and firm that is successful in achieving monopoly price. According to Rothbard,
the idea of single firm is impractical but the other two kind of monopoly is possible because
government restriction on market entry could allow the existing firm to become monopoly.

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However, if firm is producing a product that is unique in nature and only the firm has access to
the resources then it will be able to charge price as monopoly.
Answer 2
Perfect competition cannot be used as bench mark because it has no room for
entrepreneurial activity and thus chances of innovation is least (Lordkipanidze, 2018). Along
with that, a potential monopolist cannot charge monopoly price and in addition there is no
variety in products due to lack of innovation.
Answer 3
Consumers are the ones who increases the demand for goods and it is the consumers, due
to which sellers are able to charge high price (Wang, Cavusoglu & Deng, 2016). Suppose,
consumers prefer the product of inefficient firm over the product of efficient firm and thereby
encourages rise of monopoly structure in the industry. Therefore, it is appropriate to consider
consumer preference as the cause of entry barriers.
Answer 4
According to Rothbard entry in an industry cannot be restricted and thus there can be no
monopoly in any industry until there is any external force or law to restrict it (Unger, 2019).
Only the government has the power of restricting entry in a market and thereby limiting
competitive production or sale and this monopoly is the ideal one. The argument is that there are
various industry where entry of excessive firms will destroy the resources and efficiency of the
market.

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Reference
Lordkipanidze, R. (2018). Objective Equilibrium Realism in Economy for Perfect Competition.
Söderbaum, P. (2019). Toward sustainable development: from neoclassical monopoly to
democracy-oriented economics. real-world economics review, 181.
Unger, S. (2019). The effect of allocative efficiency of free markets on entropy and its
implications on taxes.
Wang, S., Cavusoglu, H., & Deng, Z. (2016). Early mover advantage in e-commerce platforms
with low entry barriers: The role of customer relationship management
capabilities. Information & Management, 53(2), 197-206.