Conclusion of Market Composition - What is a Monopoly?


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Conclusion of Market Composition - What is a Monopoly?


Monopoly occurs when there is no competition and then the supplier has a very high amount of pricing power. In addition, monopoly also is a situation in which a single organization or group possesses all or nearly all of the market for a given type of product or service. Besides, it also includes several characteristic, example and diagram in monopoly market.

In addition, there are four common types in competition free market which is ideal competition, monopolistic competition, oligopoly and monopoly. There will vary interpretation, features and illustrations in these four common types in market.


A monopoly is when there are many potential buyers but there is merely one seller that regulates the way to obtain a product and its price. This allows the company to ask for higher prices than if there is competition. Burkett, John P. (n. d, pg345) expresses that if something does not have any close substitutes and an individual vendor, economists say that its market is a monopoly and its vendor is a monopolist. Monopoly is like a market framework in which one company sells a special goods into which admittance is blocked in which the one company has extensive control over the merchandise price. So, consumers have no choice to buy their product and service. There is certainly few government firms keep the development of monopoly in order, especially in marketplaces such as cable companies like Tenaga National and press.

Characteristics of Monopoly

Monopoly market framework is selling the merchandise without any close substitutes with others. The characteristics of a monopoly market are:

Single Seller

There is merely one vendor in a monopoly market. The seller controls the way to obtain a product and decides the merchandise price. Besides, a monopolistic also control over the entire market because there is an individual particular services on the market obtain a whole lot of purchasers

Unique Product without close substitutes

In a monopoly market, their product and service are special and unique. They may have their own idea and design for the merchandise and service. All of the units of something are similar and there are no option to that product in the firm. The company are controlling over the market by offering a product that is not same with other. The company may use special information like hallmark and copyright in order to determine legal authority in the development of some goods and services.

Barriers to Entry

Normally, monopoly situation in a market can continue only when other company does not enter into the industry. In a monopoly market, they haven't any others rival because barriers of enter are very strong. It might be prevent and discourage to enter into this market to be a rival. Therefore, a monopoly presents barriers to prevent potential competitors from entering the marketplace. The barriers may even be legal for the reason that the firm to use advantage of copyrights, tariffs and trade constraints and more. If want continue the monopoly market should not be no admittance for new organizations.

Profit in the Long Run

The owner can earn much more income as he can when there is no any fear of competitive vendor in the monopoly market. In other side, if the seller gets unusual income in the long term, he can't be simply quit from this market. However, this is impossible under perfect competition. If unusual profits are available to a competitive company, other companies will enter your competition with the effect unusual benefits will be removed.

Lack of Competition

When the market need to serve like a monopoly, the lack of business competition will be the best advantage for the monopolistic. In addition they need to barriers to access for ensure other firms not easily come in the market running their business. For example, cable companies are the monopoly in market. They control all the way to obtain the product and a lot of buyers.

Since there is only one producer in monopoly, the company's demand curve presents the industry demand curve. The demand curve for a monopoly company is downward sloping, which ultimately shows the average revenue or price for each and every unit of result sold. Marginal income is additional in total revenue from offering one more product. Total income is the prices multiply with quantities. The graph shows a linear demand curve and MR curve.

For example, if the number varies from 0 to 5 products of cable television, the MR is positive (MR>0) and demand is stretchy where price decrease will boost the TR. At the number of 5 systems of cable TV would lead to negative MR (MR<0) and this range the demand is inelastic because drop in price would reduce the TR. TR is maximized when MR is zero.

Conclusion of Monopoly

In finish, monopoly is merely a vendor but many buyers in a market. A monopolist is advertising unique product and the design and idea create by his own. Owner is 'price maker', he made a decision to set the merchandise price and take full advantage of the profit. Therefore, monopoly can be an absence of competition, which frequently ends in high prices. Besides, a monopolistic must also control some company no entrance in monopoly market because some businesses are strong to adopt advantages in your organization.

Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly

There are several market buildings in which organizations can operate. The type of structure affects the firm's patterns, whether it is efficient, and the level of gains it can generate. Perfect competition means that has a market situation when a lot of vendors or providers producing and offering homogeneous product. Monopolistic competition is which there a wide range of firms providing differentiate products in market. Furthermore, oligopoly is market structure in which there are a few independent companies and monopoly is the only person seller in the market and control the complete market.

Number of sellers

Perfect competition is out there whenever there are a lot of vendors in a market and don't have large owner to look for the product price and monopolistic competition is whenever a major variety of retailers produce goods that are incredibly similar but are perceived by purchaser will vary. In an oligopoly market, there have at least two and much more firms controlling the market while monopoly means that we now have many purchasers but only 1 seller control buttons the way to obtain a products and its price. The best exemplory case of perfect competition is farming and junk food burger companies like MCD are the example of monopolistic competition. Also, exemplory case of oligopoly is coke which includes many different kinds like Coca Cola, Pepsi and Cola Turka as the exemplory case of monopoly is Microsoft.

Difference Between Products

This is homogeneous product in perfect competition. The products offered for sale are perfect substitutes of 1 another and also must identical in all respects to all vendors. Under monopolistic competition, product differentiation allows firms to charge a higher price and accumulate some earnings. In oligopoly that are given homogeneous or differentiated products while monopoly market are no close substitutes, because the monopolistic create and design the merchandise by their own. For instance, farming such as organic and natural vegetables and some tropical fruits are the example of perfect competition and KFC and Burger Ruler are the exemplory case of monopolistic competition. Also, cars, banking and petroleum will be the exemplory case of oligopoly. Cable companies such as advertising and electricity like Tenaga Nasional or Pos Laju are the example of monopoly.

Freedom of Entry

Generally, there is free entrance and exit in perfect competition and monopolistic competition. If have any barriers to entry for new companies and prices are made a decision by supply and needs. Companies in an oligopolistic market obtain and maintain market control through barriers to accessibility. The noted of admittance barriers are exclusive source of information ownership, other authorities constraints, high start-up cost and copyrights. Besides, monopoly is not allow other organizations to entry and run their business in the market. For example, if a firm wants to sell tropical berry in this land, it will need to have resources, labor and money to run the business. If the business was earned less profit, owner can exit the market without any restrictions. The exemplory case of monopolistic competition is if an organization desires to entry metal industry, the organization must find different quality, brand and design of the lightweight aluminum to run the business in this market.

Ability to Create Price

Perfect competition struggles to established price because the purchase price is depending on market price. Therefore, dealer and buyer aren't permitted to change the purchase price. For example, the price of the mineral drinking water is set by supply and demand is $1 per bottle. So, all retailers and buyers know the product price and cannot change it. In addition, under monopolistic competition, retailers can change the retail price if they want. This is because there are similar product but different brands name, quality and design of the merchandise. Therefore, seller can change the price tag on the product without influence the whole market. For example, chicken rice in normal restaurant is merely sell $3. 50 per plate but in Fowl Rice Shop Restaurant is offering $8. 90 per plate. This is the various between your quality and design of the merchandise. Under oligopoly, it is market most be based upon strategic. When one vendor lowers the price tag on the product, another business of oligopoly also will follow to lessen the price tag on the product. However, because there are rival firms, oligopolies must attention at how they respond to its change in price, output, product or advertising. For instance, if F&N Soft Drink Company increases the price of the soft drinks, other soda companies will also follow to raise the price. Also, monopoly able to set the price of the product because monopolistic is a price-maker. It is because there is merely one seller on the market and decides the price of the merchandise. Therefore, consumers haven't any choice and need to use their product and service. For instance, Telekom Malaysia Bhd is raise the communicating time of home cell phone to home phone to RM0. 50 sen each and every minute, so all users need to simply accept and follow the price by authorities because monopolistic is price maker.

Conclusion of Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly

In conclusion, the concept of market framework is central to both economics and marketing. Besides, there are difference feature in these four common types of market framework which is perfect competition, monopolistic competition, oligopoly and monopoly. Perfect Competition which is many retailers of the standardized product, Monopolistic Competition which has many sellers of your differentiated product, Oligopoly has few retailers of your standardized or a differentiated product, and Monopoly which really is a single retailer of something for which there is absolutely no close replacement.

These four market structures each stand for an abstract (universal) characterization of a kind of real market. Market framework is important for the reason that it influences market effects through its impact on the motivations, opportunities and decisions of economical actors participating in the market.

Conclusions and Recommendations

In final result, after complete both of these tasks, I gained extra understanding of the depth of monopoly and it's characteristic. In a very monopoly market only has one owner running the business enterprise in whole market. Therefore, there is no competition with others. A monopolistic must also ensure no barriers to accessibility of other companies.

In addition, free market framework is your competition that comes from allowing anyone who must sell a specific service or item to take action. Under market framework there have four common types that are perfect competition, monopolistic competition, oligopoly and monopoly. There will vary market with different characteristics and examples.

Originally published Oct 19, 2018, updated Feb 20, 2021

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