A perfect competition and a monopoly are two very different and unique market structures. Under monopolies firms get normal profits only in the short period, but disappears in the long run. Monopolies come with strong barriers to enter and exit the market. Under a monopoly, a monopolist can charge different prices and no one can complain because everything is being ran by one big business. In a monopoly the average revenue curve slopes downward, and the demand curve is very inelastic.
A firm that is the main dealer of an item or service having no nearby substitutes is said to practice a monopoly. A natural monopoly is an imposing business model that exists because of the fact that the cost of delivering the item is brought down because of economies of scale and there is only a solitary producer than if there are a few contending producers. This ordinarily happens when fixed expenses are vast with respect to variable expenses. Subsequently, one firm can supply the aggregate amount requested in the market at less cost than at least two firms so part up the common imposing business model would raise the normal cost of generation and force consumers to pay more. One of the oldest complaints against monopoly is that a monopolist will annex a competitive market by using the monopoly profits from his other markets to subsidize a price that his competitors cannot meet because it is below cost.
Since businesses are now completely dependent upon the customers, these businesses now have incentive to offer high quality products at the lower prices. It is... ... middle of paper ... ...to short sightedness and greed. I believe, however, that these crashes can be avoided so long as the citizens do not let greed control them. My solution is to have an educated and informed population before allowing the consumers total control of the marketplace. While the CEOs profit of the hardships and shortsightedness of many, we, as a society, must take control.
This doesn’t affect them, as there is no competition consumers can go to so they are either forced to either not buy the good or service or pay an extremely high price for it. This is why monopolies are bad for the economy. They take advantage of the vulnerability of consumers and exploit the very system that was designed for competition. Speaking of competition, it is the essence of what free market is supposed to be; businesses fighting to grow within a vast market filled with companies like themselves. Perfect competition involves unlimited demand, many buyers and sellers, businesses being price takers and not price makers and everyone having perfect technology to produce their goods or supplying their services.
Monopoly refers to market power as there is only one firm in the market that is in control (Sloman, Hinde and Garrat, 2012). Therefore, monopoly definitely affects customers, market and the economy negatively in various ways. However, the only one who benefits from monopoly is the one monopolizing the market as unquestionably the firm will be acting for his own benefit and not for the consumers (Sloman, Hinde and Garrat, 2012). Imposing monopoly have existed all through a lot of mankind 's history. This is on the grounds that effective powers exist both for the creation and upkeep of monopolies.
A monopoly has an enormous amount of buyers and it has no big competitors what so ever. This is because it has the power to destroy competition. A monopoly controls the prices of the goods and is the price maker as well. Unlike in a perfect competitive market, consumers/customers in a monopolistic market do not have perfect information on the products or services they buy. Consumers have limited choices and have to choose from what it is supplied.
If these practices are allowed to continue, we as the consumer, will be paying higher prices at the stores. FAIR TRADE 3 Fair trade practices and legislation Does it really help the markets remain fair? Business in the domestic and global markets have become saturated with competition which laid claim from smaller producers of goods and services; that they were being left out of the markets for the reasons of competing prices. The concept of 'fair trade' was introduced to provide these individuals with a way to compete against the pressures of the big giants of producers of goods and have equal position to sell goods in the markets. This opportunity allows ... ... middle of paper ... ... of remaining fair with a collection of antitrust laws.
In oligopoly markets, there is a conflict between cooperation and self-interest. If all the firms set their targets of outputs to be low, the price is high, but if the firm produces excess outputs the prices will be low and this leads to low profits. Therefore the firms have an incentive to expanding their revenue by output regulation. Oligopoly market structure has a number of characteristics .One if oligopoly characteristics are interdependence, since there are few sellers in the market, when one firm advertises its products in a way that is unique and so appealing in the eyes of the customers, it will automatically take the biggest market share. Another characteristics of is advertising.
Markets - why they fail * Allocative efficiency occurs when resources are distributed in such a way that no consumers could be made better off without other consumers becoming worse off. * Dynamic efficiency occurs when resources are allocated efficiently over time. * Productive efficiency is achieved when production is achieved at lowest cost. * Technical efficiency is achieved when a given quantity of output is produced with a minimum number of inputs. Consumer and Producer Surplus ============================= Text Box: A perfectly competitive market consists of: Many firms in the industry- therefore firms cannot manipulate the prices.
Perfect competitive and monopoly are the extreme of market structures. Therefore, the supply and price decision are totally difference between perfect competitive and monopoly. As, perfect competitive, where there are many firm competing, none of which is large and freedom to entry and all firm products are homogenous products. Slomans, Wride and Garatt (2012) states firms are price takers. There are so many firms in the industry that each one producers an insignificantly small portion of total industry supply , and therefore has no power whatsoever to affect the price of the product since if firms rise the price, customers can choose another firm to consume which are lots of firm in market.