The company is given the right by the government for the exclusive production of a product or service.Thus, it controls the final price in the market. A company controls a key natural resource and may restrict the resource supply to other companies.Causes of the Emergence of Monopolistic MarketsĪ monopolistic market comes into existence because of the following reasons: Price discrimination occurs when the company sells the same product to different buyers at different prices.Ĭonsidering that the market is elastic, the company will sell a higher quantity of the product if the price is low and will sell a lesser quantity if the price is high.
Price discriminationĪ company that is operating in a monopolistic market can change the price and quantity of the product or service. There are no close substitutes available in the market. In a monopolistic market, the product or service provided by the company is unique.
Due to the absence of competition, the prices set by the monopoly will be the market price. It can set prices higher than they would’ve been in a competitive market and earn higher profits. In a monopolistic market, the company maximizes profits. Generally, public utility companies – such as electricity companies and telephone companies – may be prevented from exiting the respective market. If the government believes that the product or service provided by the monopoly is necessary for the welfare of the public, the company may not be allowed to exit the market. When one supplier controls the production and supply of a certain product or service, other companies are unable to enter the monopolistic market. Government licenses, patents, and copyrights, resource ownership, decreasing total average costs, and significant startup costs are some of the barriers to entry in a monopolistic market. Hence, the market demand for a product or service is the demand for the product or service provided by the firm. Single supplierĪ monopolistic market is regulated by a single supplier. The following are the characteristics of a monopolistic market: 1. Companies that are operating in a competitive market can sell any desired quantity at the market price. Its demand curve is flat, whereas, in a monopolistic market, the demand curve is downward sloping. In a competitive market, numerous companies are present in the market and supply identical products.
0 kommentar(er)
