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Monopoly In A Market

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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 drive down the prices and eventually eliminate monopoly power (Stigler 2008).
Foreign competition and the opening of markets cause implications to existing monopolies in a country and they have a significant economic effect on the industry profit rates. 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)....

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... numerous positive aspects of international trade, some of them include a boost in economic growth, both locally and nationally as well as creates a fairer competitive market space. The outcomes of international trade are explained throughout this essay. Also, this essay identified how monopolies in a domestic market respond to foreign competition and how they must adapt to such situations. The measures taken by government to prevent and control foreign competition are briefly explained and as to how these can work to hinder domestic markets from competition. The positive, short-term effects of trade protectionism are increased government revenue, prevention of ‘dumping’ and an increase in domestic production. Although, the long-term effects of such actions are often the opposite to the original idea of protectionism and could lead a country to economic stagnation.
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