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Introduction To Market Buildings Economics Essay

Steve Ballmer, current CEO of Microsoft, once said I dont know what a monopoly means until somebody tells me. There are many meanings of monopoly depending on views and values of others. A straightforward meaning of monopoly can be defined as a form of business structure which involves a producer, usually an individual developer or sometimes several producers working jointly. In a monopoly, the marketplace is usually controlled by the suppliers or in this case the developer. A monopoly will involve a single owner who provides products without any close substitution or option and usually has a very high access and exit barrier. Which means that the amounts of buyers of the seller's products are usually very large. For instance, in Malaysia, the country's electricity resource is controlled by a single company, Tenaga Nasional Berhad (TNB) meaning they are the only existing company in this market and they're also the main one who regulates the monopoly. We as the citizens in Malaysia, have to pay our every month electricity expanses making us the potential buyers. There are a few factors and important elements that define whether a business is categorised as a monopoly.

Defining Monopoly

A monopoly is a market structure which contains a single owner or producer for a certain product but with the lifestyle of a large number of buyers. Inside a monopoly, the business usually is really the only dominant producer which means that there is only one seller of that certain product that usually does not have any close substitution or any alternative and it has an extremely high entry and exit hurdle. For example, in Malaysia, the electricity resource is managed by a single company, Tenaga Nasional Berhad (TNB) and it signifies the country's only dealer for electricity. Being the citizens in Malaysia, we must pay our regular electrical bills without any alternate options and so making us representing the large numbers of buyers. There are a few characteristics that clarifies what identifies a monopoly.

Characteristics of Monopoly

In a monopoly market, there is usually a single vendor that is in charge of the market. A single owner in this framework means that owner may be an individual or may can be found as a group and are responsible for the determining the price for the merchandise. Using Tenaga Nasional Berhad (TNB) as the example again, an individual seller means that there is no close substitution or alternative to that way to obtain product. TNB is the only supplier for electrical energy in the country and there are no similar companies that are competing against them. This means that TNB, who produces electricity, has no competition that may pose a risk to them. Therefore, they are the dominant market for electricity in the united states. When a monopoly market exists, there is always the larger number of buyers that is accessible in comparison to other markets. In a very monopoly, the merchandise is manufactured by an individual seller and it is the only dominant one on the market and thus creating a high need for that product. Therefore, you will see a large variety of purchasers in a monopoly market.

In a monopoly market, there is also the limitation of entry of new organizations. These restrictions prevent any new entries of new organizations on the market. A monopolist faces no competition as a result of barriers of accessibility. These obstacles of admittance are in either by means of natural limitations or legal constraints. Some examples of these constraints are patents and copyrights, high start-up costs, and federal government license and franchise. Together with the existence of these restrictions, monopolies are able to remain dominant in the market.

A Key Characteristic of Monopoly

Therefore, a monopoly market means that the marketplace resource curve is equivalent to the solitary firm's source curve and this the marketplace demand curve is identical to the firm's Average Earnings (AR) curve.

* The figure below shows the monopoly curve.

Cost/Price

D

C

Px

MRx

B

PY

A

MRY

AR=DD

QY

Qx

MR

Output

Types of Monopolies

One of the characteristics of the monopoly organization is the living of the obstacles to access which is categorised into two different monopolies. The first kind of monopoly is an all natural monopoly and the second one is referred to as a legal monopoly or often called as a government-created monopoly.

Natural Monopoly

A natural monopoly is a definite form of monopoly that is accessible whenever there are high fixed costs of syndication. Which means that a natural monopoly is accessible when there is certainly one organization that is able to produce at a lesser price, in comparison to several alternate firms. A natural monopoly can come up credited to economies of scale where the bigger a company becomes the lower the cost of production will be for the company. An all natural monopoly arises without the existence of government intervention.

Government-Created Monopolies

A government-created monopoly refers to the sort of monopoly that occurs due to government actions. Government-created monopolies arise when the federal government creates monopolies in order to prevent other businesses from getting into the market. With similarities to the barriers to entry, government-created monopolies have a few characteristics as well. These characteristics will be the government franchise which talks about the exclusive protection under the law to a firm so they can sell certain goods and services in certain areas, government certificate which refers to the certificate or permissions that are needed by organizations to operate any sort of business, a patent which discusses the exclusive rights to the production of an innovative product and lastly, the copyright which points out the exclusive rights that receive to businesses using materials that are do not result from them.

The last aspect of a government-created monopoly is the control over recycleables. For example, a good kind of monopoly is the DeBeers which can be an existing company that handles diamond jewelry. DeBeers is the one existing company that manages over 80% of the world's fresh diamonds which makes rivalry impossible.

Conclusion

Monopolies are a business structure that may be defined as a business that involves an individual seller and a huge number of buyers. The properties within a monopoly clarifies that in a monopoly market, the merchandise that are produced by a firm haven't any close substitution or in other words, alternate options, and also have a high accessibility and exit barrier. The barriers are the ones that prevent any form of competition or rivalry to the dominant firm. Within a monopoly market, there are a few characteristics also that clarify the gains that are obtained with link with the degree of competition experienced.

3. 0 Intro to Market Structures

A business market is composed various types of business that operate alongside one another either in co-operation or in competition. These market constructions are in the varieties of businesses that either a sizable business or small groups of businesses. For instance, there are four types of basic market constructions including the perfect competition, monopolistic competition, oligopoly and a monopoly. These are market set ups that are identified by the types of procedures they are involved in and often have certain specific features about them.

3. 1 Perfect Competition

A perfect competition is defined as a market which has many customers and sellers. In a very perfect competition, the products that can be purchased are usually of the same kind and therefore creating a tight competition among organizations. Inside a perfect competition, retailers are able to easily and easily enter or exit the marketplace. Unlike a monopoly which has the barrier to entrance, a perfect competition allows retailer or producers to enter into the market and contend with either existing organizations or other infant organizations. Among a perfect competition will be agricultural farmers such as veg farmers or livestock farmers. In agriculture, competition is usually restricted with other individuals or teams existing in the same kind of activity. The entrance of firm into the field is not too difficult due to little barriers. Within the perfect competition, the merchandise that are produced and sold are usually similar and tend to be similar to those of the opponents. Another characteristic of the perfect competition is the role of non-price competition. With many firms rivalling against each other, producing the same or similar products and advertising to the similar band of customers, products are often sold at a typical cost thus making it insignificant.

3. 2 Monopolistic Competition

Monopolistic competition refers to the market framework which there is certainly a large volume of small sellers reselling different products unlike the perfect competition that involves the same or similar products. The products that are sold are close substitutes or quite simply, alternate options which could replace, the burkha option. Usually in a monopolistic competition, vendors have an easy entry and exit from the market. A monopolistic competition being alone has similar aspects that are found in both a monopoly and a perfect competition. For instance, in a monopolistic competition, there are also many sellers and potential buyers. The difference is within a monopolistic competition, there are extensive small firms and for that reason these small firms cannot influence the market price for the merchandise or services. Another aspect is the simple entry and exit of a market but because of the difference in products, entering into the market of any monopolistic competition is much less easy as that of a perfect competition. A company that would like to enter into the market will have to create a fresh label that's not being used. The very last facet of a monopolistic competition is the non-price competition. Most contests calls for their charges but within a monopolistic competition, prices isn't the key target for competition. Due to the fact that inside a monopolistic competition market there are numerous brands and types of products, your competition is a lot more focused on the merchandise sold rather than the price that is set. It is because the businesses in a monopolistic competition will have their own price insurance plan that is needed to be satisfied. Thus, competitors will see ways to not only attract customers but to also convince these to buy their products.

3. 3 Oligopoly

An oligopoly is a market structure where there are a few firms providing either standardized or different products. Similar to that of monopoly, oligopoly also offers a tight limitation towards the admittance of organizations into and out of the market. In an oligopoly market, entrance in to the market is very hard or near impossible and because of this, some firms have the ability to earn abnormal earnings. Similar to a monopoly, oligopoly market segments are also allowed to impose barriers with the reason to control excessive production of productivity, which is not profitable for oligopolistic organizations.

There are a few features within an oligopoly which different from a monopoly. For example, in a monopoly, there is merely a single prominent firm that control buttons the market and also the price. However in an oligopoly, there are a small number of companies that happen to be big. A few of these firms are the ones that control the overall industry within an oligopoly market. Usually within an oligopolistic market, firms depend on one another when the marketplace shrinks. An oligopoly is also not restricted like perfect contests and monopolistic tournaments. The merchandise that are produce are both either standardized or differentiated which means that the merchandise produce may be similar to those in other firms or different from others.

Unlike monopoly, there are a number of firms within an oligopoly and this encourages firms to be aware of rivalry and take note of the changes made by the rivals. Being similar to a monopoly, the oligopoly market also has a few aspects that share the same understanding and interpretation. The difference between an oligopoly from a monopoly is their non-price competition. The non-price competition in an oligopoly is split into two types which will be the opting for a cost lower and the opting for a non-price competition.

3. 4 Monopoly

A monopoly is a small business structure which has a single owner of something that has no close substitution or alternatives. In a very monopoly, the product that is produce may be produced by only 1 source and has no alternate options because of the entry obstacles. A monopoly market is made up of a single dominant firm that is in control of the marketplace and charges. Therefore, with no possibility of creating a detailed substitution, there are certain restrictions for stepping into or exiting the market.

In a monopoly, the dominant firm is in charge of the prices of the merchandise that comes. For example, in Malaysia, the electric bills and tariffs are arranged by Tenaga Nasional Berhad and then implemented to the people. Usually in a monopoly, the entries to the marketplace of new organizations are restricted by a few constraints to ensure that there will not be many rivals or rivals within the market.

3. 5 Conclusion

There are various kinds of businesses that exist that are contending with each other. There are the ones that sell the same product and those that are concentrating on the same group. In business, there are many market structures that exist which will be the monopoly and oligopoly, the perfect competition and monopolistic competition. The top features of a perfect competition and a monopolistic competition are those that are just a bit similar. Within a perfect competition, the business enterprise is usually in large numbers where there are similar or standard products produced, which is similar to that of a monopolistic competition. Last but not least, there are the oligopolistic market and the monopolies which have certain similarities but also posses certain dissimilarities. For example, in a monopoly, the business enterprise is usually prominent and the company is the only person in charge of the market. Therefore, there is absolutely no close substitute no competition.

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