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Monopoly - Term Paper Example

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Monopoly Name Institution Date Table of Contents Table of Contents 2 Introduction 3 Body 3 Characteristics of Monopoly 3 Merits of monopoly 4 Demerits of Monopoly 6 Conclusion 8 References 9 Introduction Monopoly is the Greek term meaning alone or single. This term exists when a specific enterprise is the only sole provider of a particular commodity…
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Monopoly
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Monopoly

The company has unlimited market power even influencing how they charge higher prices. This may be confused with the ability to possess or own big businesses. Size is not all the characteristics of a monopoly in an enterprise, because a small business venture may also possess ability control market more than a big and existing companies. Body Characteristics of Monopoly An enterprise that enjoys monopoly exhibits a number of characteristics in the market or economy of operation. First, it maximizes profits. This is a value through the sales of the company’s services or goods to its consumers. For example in most of the third world countries and also in developing economies, most of the services or goods which have overall public consumption give way for the providing company to be a profit maximize (Lele, 2007). If it is only providing the electrical services for example, maximizing its profits is an easy feet to reach. This comes simply because there is or if any little competition from any other providing company. A company enjoying monopoly carries the tag of a price maker. Through this, the interpretation is that the company has the veto powers to decide and price goods or products, which it sells. For example, if the quantity is well in place for adequate market supply, the company therefore goes ahead and demands the price they desire as a firm (McKenzie& Lee, 2008). The characteristic of an institution enjoying monopoly is that one which creates high barriers to entry. This proposition aims at making sure that other sellers are unable to enter the market of the monopoly. For example, a company that may afford to offer promotional campaigns or motivating enticement to a publicly consumed good or service sets the standards of its customer preferences upon its competitors. In a situation where a communication company provides free minutes at a given point to its customer, a newly established competitor may find this a high level of barrier to counter given the minimal number of its customers in the same market. Being a single seller is yet another characteristic of a company enjoying monopoly in a given economy. A single seller dictates the supplies and influences the market trend with minimal interruptions (Kennedy, Waltzer & Atlantic City Historical Museum, 2004). This kind of the market brings out the existence of one seller of the good and it produces all the output. This means the whole market or region sings the tune or consumes the products of a single company. Finally, price discrimination is another characteristic that accompanies a company practicing monopoly. A monopolist does not need any outsider’s mind when choosing or changing the price of goods or service that it provides. For example, a company can sell more quantities at a relatively lower price than the competitors can even though there is minimal competition. The same case can apply when the company may decide to sell less quantities and charge high prices in a less elastic market. Merits of monopoly Certain monopolies exhibit various advantages for consumers, and social welfare. One of the advantages is that these companies are the investment in research and development. It is a common understanding that the monopolies make supernatural ... Read More
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