I.
MONOPOLY MARKET STRUCTURE - A particular country has a monopoly in
the supply of a particular commodity
• MONOPOLY- is a market structure that
due to natural factors endowments and
consists of a single seller who has
it is impossible to obtain a supply of the
exclusive control over a commodity or
commodity from any other source
service.
4. TARIFFS AND QUOTAS
- The word mono means single or one
- A tariff raises the price of goods
and the prefix polein finds its roots in
imported into the domestic economy
Greek, meaning to sell. Hence the word
and a quota restricts the volume that
monopoly literally translates to single
can be imported. They therefore protect
seller
domestic industry from international
A monopoly market structure is defined by the competition
dominance of a single seller in a specific product
Types of Monopolies
or service market, where no close substitutes
are readily available to consumers. Unlike Natural- market situation where the costs of
competitive markets, monopolies have control production are minimized by having a single
over setting prices and output levels, acting as firm produce the product or service
price makers rather than price takers. Geographic-occurs when a company takes
Monopolies wield significant market power, over a particular area as their market for a
influencing prices and production levels to product
maximize their profits.
Technological-occurs when a single firm
CHARACTERISTICS OF MONOPOLY control manufacturing methods necessary
to produce a certain product or has a
1. LACK OF SUBSTITUTE & NO exclusive rights over the technology used to
COMPETITION manufacture it
- Only one producer or seller offers the
product or service despite having many Government-owns a particular industry and
buyers there is no competition
- The products are unique with no close - Government monopoly of
substitute communication is incompatible with e
2. CONTROL OF PRICES commerce
- The prices are stable in a monopoly.
MONOPOLISTIC COMPETITION
This is because there is only one firm
involved in the market that sets the - It sits between perfect competition and
price since there is no competing monopoly combining elements of both
product - It occurs when an industry has many
companies that offer similar competing
MONOPOLIST = PRICEMAKERS companies
- It is a condition of a market structure
3. HIGH BARRIER TO ENTRY and is on the continuum alongside
- Economies of sale perfect completion, monopoly and
- Control of resources oligopoly
- Legal Barriers
In the short run firms can make super-normal
profits, similar to monopolists. However in the
long run new entrants attached by the profit
SOURCES OF MONOPOLY
potential lead to a decline in demand for each
1. LEGAL RESTRICTION-Some public sector firm's product until they only earn normal
services are statutory monopolies which profits.
means their position is protected by law CHARACTERISTICS:
- A monopoly position might also be
protected by a patent which prevents 1. Large number of sellers and buyers
2. Product differentiation
other firms from producing an identical
3. Easy entry and exit
good during the life of the patent
4. Independent decision making
2. CAPITAL COSTS 5. Non price competition
- Certain businesses such as international
airlines and chemical companies have PRODUCT DIFFERENTIATION
relatively high setup costs SIMPLE- products are differentiated based on a
3. NATURAL FACTOR ENDOWMENT variety of characteristics
HORIZONTAL- products are differentiated based CHARACTERISTICS OF OLIGOPOLY
on a single characteristic but consumers are not
1. Few firms
clear on which product is of higher quality
Oligopolistic markets have a small
VERTICAL- products are differentiated based on number of dominating enterprises
a single characteristic and consumers are clear 2. Barrier to Entry
on which product is of higher qualityis Oligopolistic marketplaces can have
high barriers to entry, discouraging new
firms from entering and competing
3. Non price competition
This covers initiatives to set their
products apart via branding,
advertising, innovation, customer
support, and product excellence
4. Nature of the product
Oligopolistic markets can have either
homogeneous products or
differentiated products, in which each
firm offers a slightly different product
5. Interdependence
The choices made by a company have a
big influence on what its rivals decide
6. Price Rigidity
Price rigidity, or prices that hold steady
over time despite variations in costs or
demand
OLIGOPOLISTIC COMPETITION
• Is a form of market structure
that features a small number of
firms
• Shapes numerous industries
around the world
OLIGOPOLY
• The term oligopoly is derived from two
greek word ' oligo ' means "few " and '
polein ' means " sell".
• A market structure in which there are
only a few sellers of the homogeneous
or differentiated products.
• Firms that are part of an oligopolistic
market structure can’t prevent other
firms from gaining significant
dominance in the market. Each firm’s
behavior can have an impact on the
other
PURE AND PERFECT COMPETITION Firms can enter or exit the market without
cost.
PURE-Where there are a large number of
buyers and sellers ·It involves purity only in Examples of Perfect Competition
one respect, namely absence of monopoly Market Structure
elements, absence of control over price and
the demand curve facing it is perfectly
elastic.
Agriculture
PERFECT-A hypothetical market form in Foreign exchange markets
which no producer or consumer has the
market power to influence prices Online shopping
It is not only pure but also free from other Street vending
imperfections. It is a broader concept than
pure competition. The essential feature of
pure competition is the absence of any
monopoly element
Best examples of pure competition
market structures
• Stock
• agricultural
• craft markets
Characteristics of pure competition
Multiple buyers and sellers
Prices are comparable
All products are similar
Different product knowledge
Product availability is similar
Easy industry entrance
Examples of pure competition
- Grocery stores
- Retail stores
- Fresh produce
What is a perfect competition
Market Structure?
All firms sell an identical product
All firms are price takers
Market share has no influence on prices.
Buyers have complete or perfect information
(in the past, present, and future) about the
product being sold and the prices charged by
each firm.
Capital resources and labor are perfectly
mobile
