Perfect Competition and Monopoly - 1734 Words

Question 3 Perfect Competition and Monopoly (a) I. Explain perfect competition and monopoly market structures, and identify the key factors that distinguish them. Perfect Competition Market In economic theory, the perfect competition is a market form in which no producer or consumer has the power to influence prices in the market. According to the website wordIQ.com, in order to classify the market is a perfect competition market, the market must match below criteria: 1. There are a large number of small producers and consumers on a given market 2. None of the producers or consumers can influence the price on their own (ie. Price takers) 3. Goods and services are perfect substitute (ie. The goods or services is†¦show more content†¦Many monopoly market is monitored by the government or other government agencies, and this can ensure the services or goods are of reasonable level of quality. Also, there would be a way for the customers to make complaint against the company. Argument against monopoly One of the argument against monopoly is the market is lack of competition, and the monopoly business does not have motivation to make any innovation to improve its product or service. Also, in the monopoly market, business has power to influence the supply level and have great influence to affect the price level. In this structure of market, consumers cannot choose their preferred suppliers and have no power to influence the price level. (b) I. Choose a case study from your home country where an externality exists in a current market. Illustrate the situation and the resulting deadweight loss in a diagram and discuss ways that your government has addressed the presence of negative externalities in the market. Petroleum industry is an example of industry with externality in the market. There are many petrol stations in Hong Kong, with different brand names, and we assume that this is a perfect competition market. If there is no externality in this market, we would conclude that the private cost that customers pay is same as social cost, and the private benefit is same asShow MoreRelatedMonopoly and Perfect Competition1045 Words   |  5 Pagesdifference between monopoly and perfect competition? Firm under perfect competition and the firm under monopoly are similar as the aim of both the seller is to maximize profit and to minimize loss. The equilibrium position followed by both the monopoly and perfect competition is MR = MC. Despite their similarities, these two forms of market organization differ from each other in respect of price-cost-output. There are many points of difference which are noted below. (1)Perfect competition is the marketRead MorePerfect Competition and Monopoly1722 Words   |  7 PagesQuestion 3 Perfect Competition and Monopoly (a) I. Explain perfect competition and monopoly market structures, and identify the key factors that distinguish them. Perfect Competition Market In economic theory, the perfect competition is a market form in which no producer or consumer has the power to influence prices in the market. According to the website wordIQ.com, in order to classify the market is a perfect competition market, the market must match below criteria: 1. ThereRead MorePerfect Competition vs Monopoly1378 Words   |  6 PagesMS (perfect competition) Vs Thames Water (monopoly) At one end is perfect competition where there are very many firms competing against each other. Every firm is so tiny in relation to the entire trade that has no power to manipulate price. It is a ‘price taker’. At the other end is monopoly, where there is just a single firm in the industry, and for this reason no competition from inside the industry. Perfect competition e.g. Marks Spencer, they have many competitors such as, Asda, NextRead MoreMonopoly, Perfect Competition, Imperfect Competition5614 Words   |  23 Pagestheory of perfect competition 3 Section 2: The theory of monopoly 9 Section 3: The theory of monopolistic competition and oligopoly 13 Section 4: Resource allocation/externalities 19 Section 5: Suggested solutions 23 INTRODUCTION There are basically two types of market situation: (a) Perfect competition – in this market, firms have no influence; they are price takers. (b) Imperfect competition – this market includes monopoly, oligopoly and monopolistic competition; firms areRead MorePerfect Competition, Oligopoly, And Monopoly Essay1988 Words   |  8 PagesThe marketplace consists of four main structures: perfect competition, monopolistic competition, oligopoly, and monopoly. 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Understanding these different type of market structures helps to better understand what type of marketRead MoreThe Various Shades Of Monopolies And Perfect Competition1003 Words   |  5 PagesThe Various Shades of Monopolies and Perfect Competition Robert Sturdevant Embry-Riddle Aeronautical University â€Æ' Abstract Monopolies are always known to hold a limited amount of control over its particular market and that gives them the dominant ability to control the prices for its goods or services, or in other words, they represent the market. They indeed have detrimental effects on consumer and social welfare, which is why most do not agree with them. This paper is an attempt to addressRead MoreMarket Structures : Perfect Competition, Monopoly, Monopolistic Competition And Oligopoly2078 Words   |  9 Pagesmarket structures – perfect competition, monopoly, monopolistic competition and oligopoly, and their determinations of price and output. It also discussed the possibility for firms to generate profits in the short-run and/or in the long-run within these four market structures. It will be shown in the discussion that both monopolistic and oligopolistic firms are able to generate profits in both short-run and long-run, while firms in perfect competition and monopolistic competition could on ly make profitsRead MoreAn explanation of monopoly, oligopoly, perfect competition, and monopolistic competition - a detailed overview946 Words   |  4 Pages(public companies). One of the key determinates to a successful national economy is the structure of its markets. The main market structures are: 1. Monopoly 2. Oligopoly 3. Perfect Competition 4. Monopolistic Competition Each of these market structures have unique characteristics, and can be classified according to three factors. The degree of competition, the first factor, is important as it classifies markets into different market structures. It compares the relative sizes of firms, the amount ofRead MoreAre Monopolies Necessarily Less Efficient Than Perfect Competition2338 Words   |  10 PagesThis essay will look at efficiency between both a monopoly and a perfect competition, and whether a monopoly is necessarily less efficient than perfect competition. Using diagrams and equations reflecting the optimal choice of output, marginal revenue and marginal cost for monopolies, I will explain how efficiency is affected by low levels of production. At the same time monopolies can increase efficiency due to their ability in price discrimination, they price people differently and therefore