Characteristics Of Monopoly Market Structure

781 Words2 Pages
bulb-icon

Recommended: Conditions for market efficiency

Monopoly Market Structure
“The word monopoly is derived from the Greek words mono for "one" and polein for "seller." (Amacher & Pate, 2013, ch. 10). Hence, the monopoly market structure having one dominant firm, called a price searcher. A prime example of a monopoly firm is a utility company. Consumers may have one utility company that provides electricity in their community, and since there are no other competitors, they have no other choice but to source power from this company. Characteristics of the monopoly market structure include the following.
• One dominant firm
• No competition
• A unique product with no close substitutes
• Very high barriers to entry
• Considerable control over price
If new firms can enter this market freely, …show more content…

The four market structures: perfect competition, monopolistic competition, oligopoly, and monopoly entails various characteristics that exemplify the level of competition within the market. These distinct features include having a number of sellers, producing a homogeneous or differentiated goods or services, pricing power, a level of competition, barriers to entering or exit the markets, efficiency, and profits. Due to the high profit and revenue some firms face within the various market structure, barriers to entry are put in place to restrict new competitors from entering. Natural, artificial, and governmental barriers play a vital role in firms ability to stay in a market, be productive, efficient, and competitive. Firms reaction to price changes, the government’s ability to create a price, and the influence of international trade on the market structures, are essential factors that economist evaluate the various market structures. Overall, the competition between market structures may not always result in the same outcome, due to the behavior and interaction between consumer’s and buyers, but in the end, both the buyer’s and seller’s are needs are

Show More
Related

  • Environmental Analysis Of Lockheed Martin

    1642 Words  | 4 Pages

    This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.

    Read More

  • Analytical Essay

    2129 Words  | 5 Pages

    When a monopoly occurs because it is more efficient for one firm to serve an entire market than for two or more firms to do so, because of the sort of economies of scales available in that market. A common example is water distribution, in which the main cost is laying a network of pipes to deliver water.

    Read More

  • Australian Airline Oligopoly

    2191 Words  | 5 Pages

    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.

    Read More

  • Sirius and XM Satellite Radio as a Monopoly

    798 Words  | 2 Pages

    When the word monopoly is spoken most immediately think of the board game made by Parker Brothers in which each player attempts to purchase all of the property and utilities that are available on the board and drive other players into bankruptcy. Clearly the association between the board game and the definition of the term are literal. The term monopoly is defined as "exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices" (Dictionary.com, 2008). Monopolies were quite common in the early days when businesses had no guidelines whatsoever. When the U.S. Supreme Court stepped into break up the Standard Oil business in the late 1800’s and enacted the Sherman Antitrust Act of 1890 (Wikipedia 2001), it set forth precedent for many cases to be brought up against it for years to come.

    Read More

  • Pure Competition

    568 Words  | 2 Pages

    There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.

    Read More

  • The Pros And Cons Of Natural Monopolies

    1470 Words  | 3 Pages

    A monopoly is a market in which there is only one supplier for the product. In the real world a prefect monopoly is rarely established and monopolies often have one large firm and include a tiny amount of other small firms. A monopoly market is often characterized by profit maximizer, price maker, high barriers to entry and price discrimination. A monopoly can have power in the market because of economies of scale, technological superiority can no substitute goods among other factors.

    Read More

  • Apple Business Model

    1809 Words  | 4 Pages

    Monopoly is “A situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for example, vast economies of scale, barriers to entry, or governmental regulation). In such an industry structure, the producer will often produce a volume that is less than the amount which would maximize social welfare”.

    Read More

  • Four Major Market Structures

    1239 Words  | 3 Pages

    There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.

    Read More

  • The Effects of Advertising on Profits

    1120 Words  | 3 Pages

    A Monopoly is a market structure characterised by one firm and many buyers, a lack of substitute products and barriers to entry (Pass et al. 2000). An oligopoly is a market structure characterised by few firms and many buyers, homogenous or differentiated products and also difficult market entry (Pass et al. 2000) an example of an oligopoly would be the fast food industry where there is a few firms such as McDonalds, Burger King and KFC that all compete for a greater market share.

    Read More

  • Perfect Competition And Real Estate Agencies

    1355 Words  | 3 Pages

    A perfectly competitive market is based on a model of perfect competition. For a market to fall under this model it must have a number of firms, homogeneous products, and easy exit and entry levels into the market (McTaggart, 1992).

    Read More

  • The Impact Of Monopolies

    783 Words  | 2 Pages

    Well the bottom line is that a monopoly is firm that sells almost all the goods or services in a select market. Therefore, without regulations, a company would be able to manipulate the price of their products, because of a lack of competition (Principle of Microeconomics, 2016). Furthermore, if a single company controls the entire market, then there are numerous barriers to entry that discourage competition from entering into it. To truly understand the hold a monopoly firm has on the market; compare the demand curves between a Perfect Competitor and Monopolist firm in Figure

    Read More

  • Alternative Theories To Profit Maximization

    1736 Words  | 4 Pages

    Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.

    Read More

  • Market Analysis: Four Different Types Of Market Structure

    1080 Words  | 3 Pages

    In conclusion, market structure is important because it leads to strategic decision making. Having a working knowledge of market structure impacts decision making because organizations will learn the characteristics of their competition and how the market will response to changes. This report discussed the four different types of market structures: monopoly, oligopoly, monopolistic competition, and pure competition. It went into detail about what each market structure was and gave every day examples of them. Additionally, it will outlined the type of market structure AutoEdge fits into, how that market structure impacts the level of competition, elasticity of demand, price, and position in the industry.

    Read More

  • Business Analysis Of Reckitt Benckiser Corporation

    4049 Words  | 9 Pages

    Examples of such goods are public utilities and professional sports leagues. The characteristics of monopoly are 1) a single seller where the firm and industry are synonymous, 2) a unique product for which there are no close substitutes available in the market, 3) the firm is price maker where the firm has considerable control over the price because it can control the quantity supplied, and 4) the free entry and exit of firms is hindered as there are no competitors in the market. This model again lacks practical implications for Reckitt Benckiser PLC because the company is not running its operations in a market where they are the sole providers of the goods and products rather the company is having competitors who produce goods and products in a similar fashion as produced by Reckitt Benckiser

    Read More

  • Compare And Contrast The Four Market Structures

    1100 Words  | 3 Pages

    A market structure are the characteristics of a market that significantly affect the behavior and interaction of buyers and sellers (Cabiya-an, 2014). This essay will describe the 4 market structures; perfect competition, monopolistic competition, oligopoly and monopoly. I will compare and contrast the market structures in relation to benefits and costs to the consumer and producer.

    Read More

More about Characteristics Of Monopoly Market Structure

Open Document