The word monopoly is come from two Greek words that are Mono and Poly. Mono means single and Poly means seller. Thus monopoly means single seller. The four key of characteristics of monopoly are Single supplier, unique product, Barriers to Entry and Exit, and Specialized Information.
Answer of question 1
1.1 What is monopoly?
Monopoly is a market with only one seller and no close substitutes for that seller's product. Monopolies arise because of barriers to entry that inhibits other companies from entering the market and exerting competitive pressure on the monopolist. These barriers to entry exist in multiple forms, so there are a number of specific reasons that monopolies can exist.
.1.2 Characteristics of monopoly
The four key of characteristics of monopoly are Single supplier, unique product, Barriers to Entry and Exit, and Specialized Information.
1.2.1 Single Supplier
The substance of monopoly is a market controlled by a single seller. The most important aspect of being a single seller is that the monopoly seller is the market. The market demand for a good is the demand for the output produced by the monopoly. This makes monopoly a price maker, rather than a price taker.
1.2.2 Unique Product
A monopoly become a single-seller status is because the product is unique and can’t find the close substitute and there are no close substitutes available for. Monopoly can control over the market because of product or services that they produce are different with other and without close substitution.
1.2.4 Specialized Information
The company preserves whole control over the market by using special information. This information may give the company the benefit of special production techniques. The specialized information may come from the form of legal tips regarding trademarks, copyrights and patents.
1.3 Diagram
Monopolies can maintain super-normal profits in the long run. As with all firms, profits are maximized when MC = MR. In general, the level of profit depends upon the degree of competition in the market, which for a pure monopoly is zero. At profit maximization, MC = MR, and output is Q and price P. Given that price (AR) is above ATC at Q, supernormal profits are possible (area PABC). With no close substitutes, the monopolist can derive super-normal profits, area PABC. A monopolist with no substitutes would be able to derive the greatest monopoly power.
1.4 Conclusion of question 1
In the conclusion, monopolies have advantages and disadvantages. One of the advantages for monopoly are high profit levels boost investment, dominant position and lower costs than in competitive markets. The disadvantages for monopoly are restricting output onto the market, reducing consumer surplus and economic welfare and restricting choice for consumers.
2.0 Introduction of question 2
The connected characteristics of a market, such as the number and relative strength of buyers and sellers and degree of collusion among them, level and forms of competition, extent of product differentiation, and ease of entry into and exit from the market. There are four types of market structures, which are perfect competition, monopolistic competition, oligopoly and monopoly.
Answer of question 2
2.1 Perfect competition
Perfect competition has large numbers of both buyers and sellers. The goods produced by all sellers are identical, and there exist no legal, social or technological barriers to entering or leaving the industry. Buyers and sellers retain complete knowledge of dominant industry prices, and the sellers' sole goal is to maximize their profit. Example for the investment industry, finance industry.
2.2 Features/characteristics of perfect competition
The four key characteristics of perfect competition are large number of small firms, identical goods, perfect resource mobility and perfect knowledge.
2.3 Monopolistic competition
Monopolistic competition is the market with many sellers, but fewer than in the perfect competition. Sellers produce different goods, with a focus on making their products stand out for their quality in design or ability in manufacture. The classic example is restaurant industry, like pizza hut, domino pizza.
2.4 Features /characteristics of monopolistic competition
The four key characteristics of monopolistic competition are large number of small firms, product differentiations, resource mobility and Extensive Knowledge.
2.5 Oligopoly
Oligopoly consists of only a few sellers that may be producing either standardized or differentiated goods, with a focus on product and brand differentiation as in the monopolistic competition. Emulation is major on features, less on price than in the more competitive models; it is much harder for sellers to leave the market. Example for computer industry, mobile phone industry.
2.6 Features/characteristics of oligopoly
The three most important characteristics of oligopoly are small number of large firms, economies of scale and barriers to Entry
2.7 Monopoly
The word monopoly is derived from two Greek words-Mono and Poly. Mono means single and Poly means 'seller'. Thus monopoly means single seller. Monopoly is a firm of market organization for a commodity in which there is only one single seller of the commodity. Example Tenaga Nasional sdn.bhd.
2.8 Features/characteristics of monopoly
The four key of characteristics of monopoly are Single supplier, unique product, Barriers to Entry and Exit, and Specialized Information.
2.9 Conclusion of question 2
In the market, there have 4 types of model which are perfect competition, monopolistic competition, oligopoly and monopoly. Each model has they own definition and features. For perfect competition and monopolistic competition, they are similar; the ways of the market going are similar. For oligopoly, they are a small number of large firms, and monopoly is a firm of market organization for a commodity in which there is only one single seller of the commodity.
