Economics Assignment: Monopoly Power, Inefficiencies, and Regulation

This economics essay examines the monopoly market structure in Australia, using the Australia Post as a key example. The essay explores the characteristics of a monopoly, including the absence of substitutes, price-making power, and barriers to entry, and how these features manifest in the context of Australia Post's operations. It analyzes the inefficiencies that arise from monopoly power, such as deadweight loss and market failure, emphasizing the impact on innovation and consumer welfare. The essay further investigates government intervention strategies, particularly the role of the Australian Competition and Consumer Commission (ACCC), in regulating the market to curb monopoly power and promote a more efficient economic outcome. The analysis includes references to relevant legislation and economic principles to support the arguments.

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MONOPOLY MARKET STRUCTURE OF AUSTRALIA
Introduction
The features of monopoly suggests there is a single seller of the commodity, absence
of any substitutes, restricted entry and they are also the price maker of the industry. The
monopoly market structure is such that the producer usually does not faces any competition
in the market because he is the sole seller in the market. As the producer is the sole seller in
the market, therefore there is a presence of restrictions for the entry of other sellers in the
market. In case of monopoly market structure, the firms will be enjoying abnormal profits
since, price of the commodities are not determined by the market forces of demand and
supply. They are usually determined by the sole seller and for this reason the particular
company will be enjoying abnormal profits for quite a long time.
In this particular topic, as an example it can be said that the Australian Postal
Corporation exercises monopoly power. The Australia Post is basically owed by the
government which is known to provide postal services to the government. The head office of
which is located in Melbourne. According to the Australia Competition and Consumer
Commission, it have been found out that Australian Post have a statutory monopoly over the
delivery of letters which weighs less than 250 gram and does not cost more than $2.40 for
sending (ACCC role in postal services. 2018). Therefore it can be said that one of the most
use example of the monopoly market structure of Australia is the Australian Post. Australia
post had hurt some of the small business since it will not allow any kind of private postal
companies in order to deliver the parcels. The Australia Post is usually operates in various
types of markets which comprises of letters with the associated services, agency services,
logistics, parcels and also retail merchandises which are present in both domestic and

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international markets. The Australia post is government owned who is known to provide the
postal services in Australia. The Australia post will widen its products and services which
needs to be sold. The government should be therefore should be investing in the technology
based infrastructure programs. Australia Post provides the postal services to Australia and it
is also obliged for supplying the letters in Australia. One of the important purpose of the
Australia post letter service is carrying the letters physically to various places of Australia.
Therefore, this particular postal service have a monopoly power in the carrying the letters and
delivering the letters to different parts of the country.
Analysis
The part of the service which usually exercises the monopoly power in the carriage is
termed as the reserved services. The monopoly power comprises of the collection go letters in
Australia which also includes delivery within Australia. However, the service also comprise
delivery of letters within Australia. The monopoly market structure of Australia includes lots
of inefficiencies in the market which states that the pricing of the monopoly will be creating a
deadweight loss as the firms will be forgoing transactions with the consumers. The
inefficiency will be taking place since they will less innovative in nature as the Australia post
will be having no one to compete with them. This will be leading to market failure. The
market failure is such an economic situation which is defined by the inefficient distribution of
services and goods. The general equilibrium of economics states that monopoly will lead to
deadweight loss me the economy and can restrict supply (ACCC role in postal services.
2018). For this reason there will be shortage of goods or services leading to market failure.
Therefore, as a result of abuse of market power the Australia post will be experiencing
market failure. For all the above reasons, monopoly market structure is stated to be the
imperfect market.

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Australia post have known to be suffering huge losses. The characteristics of the
monopoly market structure includes:
Lack of substitutes: in this case the Australia post does not have any close substitutes
as it is the sole seller and delivers letters alone in the market (Zeuthen 2018). Therefore, it
can be said that it does not have any substitutes who can actually compete with them. The
services which are provides by the Australia post will be producing goods t5hat does not have
any close substitute.
Price maker: since there is only a single seller in the market, the monopolist firm is
treated as the industry in the economy. Since there is only one organization without any close
substitutes in the market, the Australian post is therefore termed as the price maker in the
industry of postal services in Australia.

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Competition: there is absence of any close substitutes of Australia post in the market for
services.
Barriers to entry: the features of the Australia post is such that it will be restricting the
entry of the other types of postal services and there will be also presence of sufficient barriers
for entry.
The Australia Post is also known to be self-funding and will be using its assets along
with the resources for generating profits. The service also known to operate in about more
than 7000 postal outlets. The monopoly structure of the Australia Post states that under the
Australian Postal Corporation Act 1989, letters up to 250 grams are reserved to Australia
Post. The other kind of business will only be allowed to carry them since they will be need to
charge four times the basic postage rate. Therefore, it can be said that the Australia post has a
monopoly in the delivery of mail as well as in letters (Zeuthen 2018). The Australia post is
being owned by the government and it have evolved for a lot of years. It can be said that the
monopoly market structure have been created through the government license. However, the
Australia post does not have monopoly in the delivery of parcels and airfreight. Since with
the need of the postcodes, post boxes and post offices which is present in the Australian area,
therefore only a single operator will be quite efficient in the industry.
For regulating the inefficiency of the market structure of monopoly, the government
intervention will be used for curbing the power and provide efficiency in the economy. The
government will be regulating the market structure of the monopoly market. Regulation is a
method where any action by the government is intended to influence the conduct of the firms
or industries. Therefore government regulations can be sued for achieving efficient
performance ad fair conduct. The government in this case will be trying to intervene in the
monopoly market in order to curb the market power. Government will be then regulating the

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monopolies for protecting the consumer interest. Through price capping and prevention of
growth, government will be easily regulating the monopolies in the market. The key
responsibilities which the Australian Competition and Consumer Commission for regulation
of the Australia postal service are administering the record keeping rule, inquiring any
disputes for the services provided by the Australian post and also assess not6ifications of the
proposed prices. The Australia post will also be not( ACCC role in postal services. 2018).
Conclusion
The government at that time should regulate the monopolies in order to prevent huge
rise in price. When an organization will have a monopoly over the provision of any service,
the government will be regulating and therefore the firm should meet the minimum standards
of the services. The firm with the monopoly selling power will be in a position for exploiting
the monopsony buying power. In this case the government will be regulating the market
power for analyzing the quality of the services which are provide by the monopoly power.
The government therefore will be regulating the monopoly market for protecting the interest
of the consumers. Government will be combating the inequalities in the market with the help
of regulation, subsidies and taxation. For this reason the government will be intervening the
market an also promoting general economic fairness in the market.

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Reference list
ACCC role in postal services. (2018). Retrieved from https://www.accc.gov.au/regulated-
infrastructure/postal-services/accc-role-in-postal-services
Zeuthen, F. (2018). Problems of monopoly and economic warfare. Routledge.