Posted at 10.30.2018
In the progress to do this project, I understand that microeconomics is the analysis of individual economic products where we will make use of it in our daily lives. We will understand how to meet the company goals with limited resources with the better knowledge of the economic principles and theories. Besides that, we can also learn basic economics and also have a better understanding of the economics of the marketplace place. Through this report, I can understand more about the monopoly market, how it operates and its characteristics from my research. Out of this research, I've a good understanding on the monopoly on the market composition. Besides that, this research also trained me to differentiate the four market framework in terms of its characteristics which can be totally different in one and another.
According to Hashim, A. (2001) Comprehensive Economics Guide. 2nd ed. Singapore: Oxford College or university Press Pte Ltd, p. 84, Monopoly is an industry composed of a single seller of something with no substitutes and with high barries to entry. A monopoly electricity exists when a single firm control buttons more than 25% of a market.
3. 1. 1 A monopoly exists when there is only one seller of something. For instance, The Tenaga Nasional Berhad(TNB) has a monopoly of the electricity way to obtain Peninsular Malaysia. All houses and outlets who get resource from Tenaga Nasional Berhad(TNB) will need to pay their electricity costs.
3. 2. 1 The merchandise sold by way of a monopolist should be no close substitutes. A couple of no other electricity distributor in Malaysia. The only dealer is the Tenaga Nasional Berhad (TNB). There is no competition because of their product.
3. 3. 1 In a very perfect competition, you will see no single firm can influence the price and this is called price taker. The Tenaga Nasional Berhad(TNB) will have the energy to decide and control the purchase price in the market since there are no competition around.
3. 4. 1 In a monopoly market, you will see tight barriers to the admittance of new companies and the barriers of admittance are natural. A monopolist faces no competition because of barriers to admittance.
AAdvertising in a monopoly market depends on the merchandise sold. If the merchandise are luxury goods such as imported items then the monopoly will require some advertisement to promote the consumers on the goods. Local public tool such as the electricity by Tenaga Nasional Berhad (TNB) need no advertisement since the consumers know from where you can obtain such goods and they're the only company who provides electricity.
Monopolies can maintain super-normal revenue in the long run. As with all firms, earnings are maximised when MC = MR. Generally, the amount of profit depends upon the degree of competition in the market, which for a real monopoly is zero. At revenue maximisation, MC = MR, and result is Q and price P. Given that price (AR) is above ATC at Q, supernormal earnings are possible (area PABC).
With no close substitutes, the monopolist can derive super-normal earnings, area PABC.
A monopolist without substitutes would be able to derive the greatest monopoly vitality.
Cabbages, carrots(these approximate to perfect competition)
1. Undifferentiated or 2. Differentiated
1. Some, such as
2. Automobiles, electrical appliances
Restricted or completely blocked
Many prescription of drugs,
local water company
4. 1. 1 The perfect competition has large number of buyers and retailers. Organizations are price taker because the number of a single vendor sells in market is so small compared to the overall industry. Besides that, the price is always constant where the vendor can only make a decision the quantity to be sold rather than the price tag on selling of something. An example of the perfect competition is the duck providers. The price tag on the duck on the market is still is determined by the demand and offer. The sellers can never control the price of the duck on the market even if they have high production, it will not affect much for the reason that industry.
4. 1. 2 In a very monopolistic competition, there are a sizable number of vendors. The amount of firms are present in a monopolistic competition market is very poor competition. Due to the size of each organization which is small and hence, no individual firm can influence or control the marketplace price. Therefore, each organization follows an independent price-output coverage. The company that produces toothpaste is in the monopolistic competition where there are extensive brands of toothpaste in Malaysia such as Darlie, Colgate and Polleney. They are able to never affect or control the price in of their products on the market.
4. 1. 3 In an oligopoly, the amount of organizations is small but the size of the businesses is large. The market share of each organization is large enough to dominate the marketplace. A few organizations control the entire industry of oligopoly. Including the petroleum companies specifically Shell, BHP, Caltex. They are really large firms who've market stocks which able to dominate the market.
4. 1. 4 Under monopoly, there is merely one owner of something and large number of buyers are present. A monopolist is a cost manufacturer since there is only one seller no competition and it has the power to control the purchase price in the market. One of the types of a monopoly is the Tenaga Nasional Berhad (TNB) where their company products electricity for the whole Peninsular Malaysia.
4. 2 Independence of Entry
4. 2. 1 There exists unrestricted flexibility of accessibility and exit of the organizations from the industry in the perfect competition and the monopolistic competition. A company can easily enter into the market and exit the marketplace anytime they would like to. No restriction is imposed. If any firm who wish to open a fruit farms and operate the business if he/she has the necessary factors of development ( land, labour and capital) he/she can always starts off the business even there's a lot of berry farms are present.
4. 2. 2 In an oligopoly market, there are many barriers to entrance. Although similar to a monopoly, the firms in an oligopoly will limit new firms to enter the market. The types of barriers to entrance are economies of scale, forces to combine, ownership of patents and copyrights to mention a few. This is illustrated briefly by the petroleum industry in Malaysia where Mobil, Shell, Petronas and Caltex which already can be found in the market plus they control the marketplace. The chances for a fresh firm to be produced in the petroleum industry in Malaysia is very low due to the huge capital investment that they need to have a posture in the market.
4. 2. 3 Beneath the monopoly market, there will be restricted independence of entry and there are legal restrictions that restrict the accessibility of new companies into the industry. Hence there will be no competition and competition for businesses who are in the monopoly market. Telekom Malaysia (TM) is a good exemplory case of a monopoly since there is only one home cell phone service in Malaysia which is Telekom Malaysia (TM) rather than any other firms.
4. 3 Nature of product
4. 3. 1 The businesses in a perfect competition must sell homogenous products. Inside the perfect competition structure, buyers cannot differentiate products in conditions of quality, packaging, colour and design being that they are indistinguishable. Furthermore, the organization cannot charge another price for the same product which can be found on the market. A classic example of this is the telecommunication service agency in Malaysia which can be Digi, Maxis and Celcom. They offer customers with the same product on the market but buyers cannot differentiate their products no matter how, since they are yet.
4. 3. 2 The monopolistic competition market offers differentiated products which are not identical. Each companies will have their own method to differentiate their products from other vendors to obtain additional customers or consumers. Their products can be different in conditions of the look, advertising, branding, and labeling. For instance, when a perfume is effectively packaged in a field and called 'best perfume' then the product is monopolistic competition.
4. 3. 3 Products in the oligopoly may be differentiated or undifferentiated. In Malaysia, the exemplory case of oligopoly market are petroleum and automobiles where petroleum is identical while automobiles are differentiated products.
4. 3. 4 Under monopoly market, the products produced has no close substitutes or unique. Tenaga Nasional Berhad (TNB) is one of the example of monopoly who's the electricity supplier from local people utility without any close substitutes but if the buyers can find other way to get electricity then the product is forget about in monopoly and monopoly cannot exist when there is a competition or any substitute product.
4. 4. 1 Within the perfect competition, the role of non-price competition is insignificant since many sellers sell the merchandise at a fixed price and furthermore, the merchandise are identical. On the other hand, non-price competition may also be referred as offering cost which is the expenses which used to raise the sale of the product of a firm. In perfect competition, firms cannot control the price and their goods are homogenous, so there is absolutely no selling cost. For instance, we do not see any advertising campaign in the television or any other press about a product that has no brand.
4. 4. 2 Under monopolistic competition, some non-price competition are present especially in advertising when organizations compete for his or her products rather than the price tag on the product. Companies should use various methods such as advertisements and advertising to appeal to more customers to buy their products.
4. 4. 3 The companies will try to fully capture the market through better marketing campaign and producing high quality products to the clients instead of minimizing the price. This is because when one company reduces the price of the merchandise other firms will observe the same technique. In fact, the oligopoly businesses compete with the other person through non-price competition rather than price competition. They'll try to make smarter products in conditions of the product quality and number so that can make the firm more competitive when compared with other companies.
4. 4. 4 In a monopoly the companies is only going to advertise because of their own image since there is no competition around. There is only one seller for this product, so organizations do not really need to advertise much to raise the sale of the merchandise. Customers will definitely know that firm supply this type of product and they can only just get such product from this firm.
5. 0 Conclusion and recommendations
A monopoly is the marketplace where there is only one seller and many purchasers. Furthermore, the product produced has no close substitutes to make them the price manufacturer or the they have the power to regulate the price in the market. There is also the limitation on the entry of new firms to make it does not have any competition. Hence, they advertise is determined by the products sold. A monopoly will only are present when it fits all the characteristics stated.