In international trade today, foreign enterprises enter new markets and try and compete with existing domestic brands. In markets where an enterprise has a sole monopoly, this creates implications for that one business and it must modify its tactics and procedures to the situation. This essay will identify the monopoly in a market and briefly explain the main measure used to reduce monopoly. Furthermore, it examines the influence of foreign competition on monopolies in a market and how they must respond and act in such circumstances. Lastly, the measures that governments take in order to control and protect its domestic markets from foreign competition will be explained.
An enterprise that is the sole seller or provider of a good or service is called a monopoly. If not intervened by a government, a monopoly is unrestricted and can decide to set any price of its product or service that it chooses. Monopolistic enterprises can therefore determine the price and set it above average cost in order to make a substantial profit (Stigler 2008). If an enterprise make a large profit, other enterprises are bound to enter into the specific market to capture some of the high returns. This attracts other businesses to enter into the market and eventually their competition will
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The less restrictive trade policies that are in place encourage more competitive pricing behaviour in domestic markets and have a negative effect on the domestic producers profit rates (Espinosa & Espinosa 2014, p. 343). Foreign competition limits the domestic businesses ability to charge above average prices for their products. Therefore, profit rates are low in markets where foreign competition is more prominent and when the barriers to entry are low, the threat of foreign competition is higher (Espinosa & Espinosa 2014, p.
The economic concept of protectionism dates back to Adam Smith’s idea of comparative and absolute advantage. The country with the ability to produce the same amount of a good or service with fewer resources than another country has the absolute advantage. However, if the other country has a lower opportunity cost of producing that same good or service, they have the comparative advantage. Smith argued that “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage” (Smith, 1904, IV.2.12).
We all hear the term “monopoly” before. If somebody doesn't apprehend a monopoly is outlined as “The exclusive possession or management of the provision or change a artifact or service.” but a natural monopoly could be a little totally different in which means from its counterpart. during this paper we'll be wanting into the question: whether or not the govt. ought to read telephones, cable, or broadcasting as natural monopolies or not; and may they be regulated or not?
Others added that monopolies produce less output and charge a higher price than a purely competitive environment. The monopolist sets the marginal revenue equal to marginal cost and output is therefore smaller. In monopolies, profits can persist indefinitely, because high barriers to entry prevent new firms from taking part in the
...ystem primarily responsible for promoting global competition. Free trade also promotes shifts in production so as to fit the “comparative advantage” model. Though free trade is widely practiced concerns with how to regulate free trade, something supposedly unregulated, countries have to subject themselves to the controversial institutions of the IMF and WTO. Fair trade policies while potentially creating smaller markets support workers’ rights in both the U.S. and developing nations. Though the pros and cons of globalization continue to be debated the United States can no longer escape its role in the global economy nor can it impose policies that are detrimental to the United States founding ideals. However policies that play towards the advantages of both free and fair trade could stimulate a healthy domestic economy that is also competitive in the global market.
America’s Monopoly Problem by Derek Thompson is a short article that talks about the monopoly issue in America. It starts out talking about all the of the different areas in America that have monopolies in them. Things like the online stores, grocery stores, Airlines, music ebooks, and beer. Then Thompson begins to talk about the beginning of the industrial age of America and how the Sherman Anti-Trust Act was placed. Talking about how a business with a monopoly didn’t just dominate in its own industry but that business also had political power. Thompson goes on and discussed how monopolies in the 20th century have come around. He starts to talk about what some of these huge companies are doing to cause less competition. Then he talks about what the government is trying to do to prevent these huge companies from doing such things. Then Thompson goes on to discuss about how big these monopolies can get before they are bad for the economy.
Few governments will argue that the exchange of goods and services across international borders is a bad thing. However, the degree to which an international trading system is open may come into contest with a state’s ability to protect its interests. Free trade is often portrayed in a good light, with focus placed on the material benefits. Theoretically, free trade enables a distribution of resources across state lines. A country’s workforce may become more productive as it specializes in products that it has a comparative advantage. Free trade minimizes the chance that a market will have a surplus of one product and not enough of another. Arguably, comparative specialization leads to efficiency and growth.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
While free trade has certainly changed with advances in technology and the ability to create external economies, the concept seems to be the most benign way for countries to trade with one another. Factoring in that imperfect competition and increasing returns challenge the concept of comparative advantage in modern international trade markets, the resulting introduction of government policies to regulate trade seems to result in increased tensions between countries as individual nations seek to gain advantages at the cost of others. While classical trade optimism may be somewhat naïve, the alternatives are risky and potentially harmful.
Monopolies are when there is only one provider of a specific good, which has no alternatives. Monopolies can be either natural or artificial. Some of the natural monopolies a town will see are business such as utilities or for cities like Clarksville with only one, hospitals. With only one hospital and there not being another one for a two hour drive, Clarksville’s hospital has a monopoly on emergency care, because there is not another option for this type of service in the area. Artificial monopolies are created using a variety of means from allowing others to enter the market. Artificial monopolies are generally rare or absent because of anti-trust laws that were designed to prevent this in legitimate businesses. However, while these two are the ends of the spectrum, the majority of businesses wil...
Monopolies have a tendency to be bad for the economy. Granted, there are some that are a necessity of life such as natural and legal monopolies. However, the article I have chosen to review is “America’s Monopolies are Holding Back the Economy (Lynn, 2017)” and the name speaks for itself.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
In order for international trade to work well, governments must allow the world market to determine how goods are sold, manufactured and traded for all to economically prosper. While all nations may have the capability to produce any goods or services needed by their population, it is not possible for all nations to have a comparative advantage for producing a good due to natural resources of the country or other available resources needed to produce a good or service. The example of trading among states comprising the United States is an example of how free trade works best without the interve...
Firstly, what should be noted here is that international trade has been providing different benefits for firms as they may expand in different new markets and raise productivity by adopting different approaches. Given that nowadays marketplace is more dynamic and characterized by an interdependent economy, the volume of international trade has grown substantially in recent years, reducing the barriers to international trade. However, after experiencing the economic crisis that took its toll in 2008 many countries adopted a different approach in terms of trade barriers by introducing higher tariffs in order to protect domestic firms from foreign competition (Hill). Secondly, in order to better understand the implications of the political arguments for trade it is essential to highlight the main instruments of trade policy (See appendix 1).
An oligopolistic market has a small number of sellers dominating market share and therefore barriers to entry are high. These sellers are highly competitive and do not act independently of each other. Access to information is limited so sellers can only speculate of their competitor’s actions. Sellers will take advantage of competitor’s price changes in order to increase market share.
Free trade is a policy that relies on the concept of comparative advantage that when comparing two countries one of those countries will have the capability to make a product that is better than the other country. So it is best if each country focuses its efforts and resources into one product to increase the economic activity for both countries. The determination of who produces a product better is based on the open market without intervention from a government who may try to control a trade by imposing government protective measures such as tariffs. The World Trade Organization has been tasked with monitoring free trade, but it has been noted that their policing has not been effective to stop such interventions. Free trade not only relies on a laissez-faire approach but also on assumptions of conditions. The assumptions used by many for economic theories are not always accurate but rather the justification for using the assumptions is so that economic theories can be applied for the greater good of an economy.