Monopoly and Monopolistic Competition in Australia

Running head: MONOPOLY AND MONOPOLISTIC COMPETITION IN AUSTRALIA
Monopoly and Monopolistic competition in Australia
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Author Note

1MONOPOLY AND MONOPOLISTIC COMPETITION IN AUSTRALIA
Table of Contents
Introduction................................................................................................................................2
Analysis......................................................................................................................................2
Conclusion..................................................................................................................................7
References..................................................................................................................................8

2MONOPOLY AND MONOPOLISTIC COMPETITION IN AUSTRALIA
Introduction
This report tries to provide examples of the monopoly and monopolistic market
structure that is prevailing in Australia and why the government may try to intervene in the
monopoly markets rather than intervening into the monopolistic market structure. To
understand this topic a detailed theoretical analysis of the monopoly and monopolistic market
structure is provided. The definition of these are provided along with their graphical analysis.
Minifie (2017) in his scholarly article has provided few examples relating to the market
structure of Australia. The reference to this article is provided at the end of the paper.
From the above report, it is expected that the monopolies in Australia will require a
set of revised policy prescriptions that will increase the welfare of the consumers. The
application of this would be very useful, as it would help in understanding the market
structure of the major industries in the Australian market and their prime drawbacks relating
to social welfare of the consumers.
Analysis
The market structure of Australia is dominated by various duopoly markets. Yet, in
few major sectors, there exists monopoly and monopolist market structures. However, the
monopolists in the economy have not been performing well in the recent times. In this section
of the report, an effort has been made to discuss the various drawbacks of the major
monopoly industry of Australia.
According to the conventional definition, market is a place where the buyers and the
sellers interact with each other to buy and sell a commodity on a price that is agreed by both
of them (Brue et al., 2014). Now, the market consists of different types of competition. Here
only the Monopoly and Monopolistic market is discussed in details.

3MONOPOLY AND MONOPOLISTIC COMPETITION IN AUSTRALIA
Price
Quantity
AR
MR
MC
P*
Q*
FIGURE-1
A
B
C
D
E
CONSUMER
SUPLUS
PRODUCER
SURLPUS
DEADWEIGHT
LOSS
F
G
Monopoly Market: In this type of market, there is a single seller and there are
numerous buyers. The sellers is a price setter in this type of market. The seller sets a price,
which the buyers have to pay, and in general, these prices are high. The main reason for the
high prices is due to the non-availability of close substitutes for the commodity and entry
barrier to the market (Varian, 2014). Now, because of this high prices the consumer surplus
decreases and the deadweight loss increases. The graphical analysis has been provided below.
FIGURE 1: Monopoly Market
(Source: By the Author)
From the above diagram, it can be clearly seen that the equilibrium occurs at the point
where the Marginal Cost (MC) curve intersects with the Marginal Revenue (MR) curve. P*
and Q* are the equilibrium price and output. The area under the curve ADCP* represents the
producer surplus and the area under FDCP* represents monopolist profits. The area under
triangle BP*C represents the consumer surplus. The area CEG represents the deadweight loss
to the society.