Monopoly is only one seller to produce the products that no close alternatives. Therefore, it is the monopolistic structure of the market. The single seller will be the form of self-employed or joint-stock company or the partnership. The single company usually we called as monopoly and it is the price setters and can control the commodity market supply. However, this does not mean that he can set prices and production levels. The few things that he can do are either output or price but not both at a same time. Monopoly is a big company and it is the sole supplier of a commodity or service. This one seller has no competition to compete with so that he can control the price of the good or service. If there is no competition, the prices of products sold with any other products should have a near-zero cross elasticity. Monopolies are usually bad for an economy because they limit free trade and allow the market to set prices randomly.
1.1 Characteristics of monopoly
The monopoly is a single seller of a good for no readily available alternatives. It should have high barriers to entry and other companies cannot easily enter the market to provide the goods. Monopolies tend to produce legal obstacles. Patent law granted to the inventor the exclusive production and sales of the product in a period of time. Licensing restrictions will often limit who can provide the goods or services in a particular geographic region. Monopoly is a large number of firms and same with the competition but the size of each firm is quite small. So, it cannot easily influence the market price through personal action. Monopolistic competition has a lot of companies and the company’s products are not the same. The companies itself want to sell a large amount of their own products so they are trying to build their own product advantages. Finally, it creates advertisement, spending on advertising is referred to as cost of sales.
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Product differentiation is one of the characteristic of monopoly. Each firm can produces a differentiated product under monopolistic competition. The substitutes are not perfect although the products are quite close to the substitutes and the products are alike but it is totally different. Monopolistic usually found in case of daily necessities such as shampoo, toothpaste, detergent, medical products and others. Monopoly is a common feature of the information available to others production technology control. This specialized information often is in the form of patent, copyright or trademark established by law. Although these legal barriers to enter, they also pointed out that the information is not completely shared.
Enterprises under the conditions of monopolistic competition are free entry and exit. It means that they can free to join and leave the industry at any time. They can easily quit the market if there are any losses and the firm has no power to control over other firm. Besides that, firms under monopoly are lack of perfect knowledge of the market because the products are close substitute to the others so the buyers normally do not know more information of the products like the qualities and prices. At the same time, a seller also doesn’t know the preference of the buyers.
A pure monopoly is a single supplier market. Regulatory purpose of the existence of monopoly power, individual enterprises can control a particular market to 25% or more. Monopolies can form for all kinds of reasons. If an enterprise has exclusive ownership of scarce resources, it has a monopoly power of this resource, and is the only one you can use it. Producers may have a design idea of patent or copyright, sound, name, text or images and let them exclusive rights to sell goods or services. A monopoly could be created following the merger of two or more firms and it can reduce competition. The monopoly of the traditional perspective emphasizes the social costs and higher prices.
1.3 Monopoly Graph
Market structure described a particular organization of the market have certain key features in a specific tissue. The characteristics are the number of firms in the market, control the prices of related products, types of products on the market, can discourage new enterprises to enter the market and the presence of non-price competition in the market. The number of firms in the market can consider form an important basis in the market to supply the particular product for category market structure. The individual companies exercise control over the price, its sales of products is another important feature of the market structure. It can distinguish between a characteristics of the market structure classification used in the company’s products in different industries.
2.1 Perfect Competition
Perfect competitive market forms a highly competitive market, to achieve the optimal allocation of resources. In reality, this model still provides more realistic and can determine the benchmark market structure. The perfectly competitive describes an industry and each firm faces a horizontal demand curve. This usually happens if there are a lot of companies to produce the same products. A firm in perfect competition is called “price taker”, it faces the market that given the price, but the competition of the companies are not price makers. Perfect competition is a market structure that idealized version provides an understanding of how markets work in the capitalist economic base. As a reference it can be a standard for the other market structure and it can also be better understood perfect competition.
2.2 Monopolistic Competition
In monopolistic competition, there are many companies in the market supply. Every business has a small enough to share of the market that it can change their actions, without affecting the behavior of other enterprises. Besides that, it is free entry and exit of enterprises to enter the industry. Each company selling differentiated products and face a downward-sloping demand curve. Monopolistic competition is similar to perfect competition, there are many small businesses in the market and there is freedom of entry and exit. The main difference is that the companies selling exactly the same product in perfect competition but monopolistic competition firms are selling something slightly different. Monopolistic competition in the enterprise has a certain influence on the market. It can raise prices and not lose all the customers.
Oligopoly is including a market-competitive enterprises, each believe that their actions will lead to some form reaction is a small number from other companies cannot be ignored. More and more companies in the market, so that the more likely is the reaction of the other companies is negligible. An oligopolist believes that other companies will respond to changes in their production and pricing decisions. An oligopolistic market structure is characterized by the interdependence of the companies in the industry and interdependence between the actual or expected from a small number of companies in the industry. Characterized by an oligopolistic industry is also typical of economies of scale. Production economies of scale mean that, with the rise of the level of production, the unit cost of the product can reduce the use of any plant.
Monopoly can be considered to be fully competitive contrary. It is a market form which is only one seller. Although at first glance may appear, it is a rare monopoly market structure but that is not the case. Monopoly has few industries in the United States. Some utility companies provide examples of a monopoly. A monopoly can appear if a firm has the necessary material that needed to produce a product. The monopolist can legally established government institutions when the sales of a particular product or service market franchise. Monopolist is a price maker and can increase the amount of sales by lowering the price.
Industry in the real world is uncommonly characterized by perfect competition. In some cases, the social has to tolerance monopoly. For an example, a natural monopoly or monopoly patent case. However, the idea of â€‹â€‹competition is very deep-rooted social. Therefore, as long as there is a reasonable degree of competition such as monopolistic competition or oligopoly case, social can feel quite safe and its work of a market. The concept of competition is very widely used in economics, especially microeconomics. The competition is also considered as the basis of the free market economy of capitalism. Different results based on different market structures, economists think that the ideal market structure is from the social point of view, than others.
3.0 Conclusion and Recommendation
Monopolist is a price maker because he did not have any competitors. Therefore, the demand is price inelastic. Monopolies can form for all kinds of reasons. If an enterprise has exclusive ownership of scarce resources, it has a monopoly power of this resource, and is the only one you can use it. Due to the lack of competition, the monopolist can charge higher prices, rather than in an increasingly competitive market. Perfect competition is a market structure that idealized version provides an understanding of how markets work in the capitalist economic base. An oligopolist believes that other companies will respond to changes in their production and pricing decisions. There are four basic types of market structure and all of it has their own features.