basic characteristics of a monopoly

The four key features of monopoly are:

  • a individual house selling all end product in a market,
  • a alone merchandise,
  • limitations on entry into and go out out of the industry, and more frequently than non
  • specialized information about production techniques unavailable to other possible manufacturers.

These four features mean that a monopoly has extended ( get oning on complete ) market control. Monopoly controls the selling side of the market. If anyone seeks to get the production sold by the monopoly, so they must purchase from the monopoly. This means that the demand curve confronting the monopoly is the market demand curve. They are one and the same.

The features of monopoly are in direct contrast to those of perfect competition. A absolutely competitory industry has a big figure of comparatively little houses, each bring forthing indistinguishable merchandises. Firms can freely travel into and out of the industry and portion the same information about monetary values and production techniques. There is one house, non a batch of little houses.

There is merely one house in the market because there are no close replacements, allow entirely indistinguishable merchandises produced by other houses. A monopoly frequently owes its monopoly position to the fact that other possible manufacturers are prevented from come ining the market. No freedom of entry here. Neither is at that place perfect information. A monopoly house frequently has specialized information, such as patents or right of first publications, that are non available to other possible manufacturers. ”

How the monopoly determines production and pricing determinations.

The individual marketer, of class, is a direct contrast to hone competition, which has a big figure of Sellerss. In fact, perfect competition could be renamed multipoly or manypoly, to contrast it with monopoly. The most of import facet of being a individual marketer is that the monopoly marketer is the market. The market demand for a good is the demand for the end product produced by the monopoly. This makes monopoly a monetary value shaper, instead than a monetary value taker.

It is true that a house with monopoly has price-setting power and will look to gain high degrees of net income. However the house is constrained by the place of its demand curve. A pure monopolizer is the exclusive provider in an industry and, as a consequence, the monopolizer can take the market demand curve as its ain demand curve. A monopoly will bring forth the measure of end product dictated by the intersection of the MR and MC curves, bear downing a monetary value set by the demand curve.

“ The marketer efforts to put fringy cost equal to fringy gross, or to bring forth at q0. From the consumers ‘ point of view, the best sum to bring forth would be q1. The monopolizer restricts end product because of a divergency between fringy benefit as the house perceives it and fringy benefit as purchasers perceive it. Producing beyond q0 is non in the involvements of the house because the excess benefit it sees, the fringy gross curve, is less than the excess cost of production, shown by the fringy cost curve. Extra end product is in the involvements of purchasers because the excess benefit they get, shown by the demand curve, is greater than the excess costs of production. ”

“ In footings of the production-possibilities frontier shown below, an economic system with some industries competitory and others monopolized ( Sellerss are monetary value seekers ) will bring forth at point B. However, consumers would be better off at point a because the addition of x sum of monopolized goods has a greater value than the loss of y sum of competitory goods.

Because a monopolizer restricts production from what a competitory industry would make, excessively many resources are being used in the competitory industry and non plenty in the monopolized industry. Therefore, the being of monopoly violates product-mix efficiency. Because fringy rates of permutation are non equal to fringy rates of transmutation, the economic system produces the incorrect mix of merchandises. ”

How the above antimonopoly Torahs are able to control monopoly power.

First U.S. statute law enacted to control concentrations of power that restrict trade and cut down economic competition. Proposed by Sen. John Sherman, it made illegal all efforts to monopolise any portion of trade or commercialism in the U.S. By restricting a concern ‘s ability to rule its rivals in the market place, the new jurisprudence made the American economic system more dynamic and more unfastened to new rivals and new engineerings. In a state characterized by a powerful ethos of free competition, the Sherman Act has – frequently successfully – mediated between two partly contradictory effects of that ethos: a committedness to competition unfettered by inordinate authorities ordinance, and freedom from market domination by powerful private involvements.

The committedness to forbid price-fixing has remained resolute: In 1999, for illustration, the federal authorities concluded its instance against an international vitamin trust when its members agreed to ticket nearing $ 1 billion and to imprisonment of the corporate directors involved. The Sherman Antitrust Act prohibits monopolies and restraint of trade. For illustration, several providers of doodads get together and agree they will all sell doodads for $ 1.00 to shops, and no less. This hurts competition. This Act prohibits:

  • a confederacy by two or more individuals to unreasonably keep trade ( i.e. , to unreasonably restrict competition ;
  • an improper monopoly or an effort to monopolise an industry ; and
  • monetary value repair.

Since 1990, Microsoft Corporation, the package maker, has been investigated and sued by the U.S. federal authorities and 20 U.S. provinces, every bit good as by the European Union and legion private complainants. Notably, the Anti-Trust Act, a nineteenth century legislative act, was still at the bosom of the U.S. instances seeking to control Microsoft ‘s allegedly anticompetitive behavior in high engineering industries at the cusp of the twenty-first century. As a consequence, the ethos of the information engineering industry changed. Companies began to prosecute more freely in research that competes basically with Microsoft engineering.

The Clayton Antitrust Act of 1914, amended by the Robinson-Patman Act of 1936, prohibits favoritism among clients through pricing and disallows amalgamations, acquisitions or coup d’etats of one house by another if the consequence will “ well lessen competition. ”

The Clayton Act prohibits a corporation from geting an involvement in the stock or assets of another corporation if making so well lessens competition or may make a monopoly. A Federal Court may come in a divestiture order doing the guilty party give up the belongings it acquired.

Other methods for a authorities to curtail monopoly activities.

Harmonizing to the text book “ Business Economics ”, by T.R Jain and O.P Khann, published in 2009, “ By take downing the end product and raising the monetary value of his merchandise, a monopolizer can work the society. Consequently, authorities keeps the activities of the monopolizer good under control. Except antimonopoly act, monopoly can be controlled and regulated in the undermentioned manners ”.

Care of just competition: Monopoly power comes into being when it is non opposed by any existent or possible competition. In order to forestall it, legislative steps have been taken in many states to keep just competition and to look into unjust trade patterns of the monopoly houses.

Monetary value and Output control steps: Monopoly is besides criticized because under it, more monetary value is charged and less end product is produced. It is, hence, suggested that monopolizer be compelled to find monetary value and end product equal to competitory monetary value and end product.

Purchasers ‘ Association: Setting-up of consumers ‘ Forums has been advocated to heighten the bargaining capacity of the buyers. This suggestion is based on the premise that monopolizer derives his bargaining capacity because of the absence of competition. The buyers excessively can increase their bargaining capacity by organizing their associations and by stoping competition among themselves. This will interrupt monopoly power. Consequently, monopsony will asseverate itself in monetary value finding.

"Looking for a Similar Assignment? Order now and Get a Discount!