Monopolistic Competition In Australia

1019 Words3 Pages

The term monopoly refers to a market structure in which there is only one seller, barriers to entry for other firms are very high hence they cannot enter the market, there are no close substitutes in the market for the product and the firm operating in the market has complete control over the prices.
There are two types of monopolies, legal monopoly and a natural monopoly. A legal restriction imposed on entry of a new firm is called a legal monopoly. This type of monopoly is practiced by granting a monopoly franchise for example Australia Post, by a government license or through patents and copyrights. Whereas natural monopoly is one firm serving the entire market at a lower price.
Some national examples of monopoly are the supply of water and gas, Australia Post, BHP Billiton and …show more content…

Some characteristics of monopolistic competition are that all the firms make independent decisions regarding the price and output. The products of all the firms are differentiated which means similar but not identical, hence they are not substitutes, there are no barriers to enter or leave the market and there are a large number of firms.
They key to operate in such a market is through differentiation. This can be done in a number of ways discussed here under:
• Physical product differentiation, where firms use size, design, color, shape, performance, and features to make their products different. For example, consumer electronics can easily be physically differentiated.
• Marketing differentiation, where firms try to differentiate their product by distinctive packaging and other promotional techniques. For example, breakfast cereals can easily be differentiated through packaging.
• Human capital differentiation, where the firm creates differences through the skill of its employees, the level of training received, distinctive uniforms, and so

Open Document