• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Monopoly, When a firm is the sole supplier of a particular product or service then we say that it is a monopolist.

Extracts from this document...

Introduction

A. Define Monopoly When does a firm enjoy a dominant position in the market? Why is a firm enjoying a dominant position often associated with monopoly power? B. Why is monopoly power often considered to be detrimental to the interest of consumers? Are there any desirable features associated with monopoly? What government measures can be suitable for controlling monopoly powers. -+ ++++++++++++++++++++++---------- When a firm is the sole supplier of a particular product or service then we say that it is a monopolist. A monopolist is able to prevent the entry of competitors by means of barriers and for whose product or service there is no very close substitute therefore no one can compete against him. An example of this is the Water Services Corporation which is the only supplier of tap water in Malta and it is very difficult for other firms to start offering the same services because a lot of capital in terms of land, labour and machines are needed thus it will not be affordable. ...read more.

Middle

Not all monopolies can enjoy this benefit, for example Malta Post is a monopoly in Malta but if it had to make an high increase in the prices of its services consumers will utilize more their telephones, e-mails and faxes. This means that Malta Post also have substitutes to its services. Therefore not all monopolies have the same power. Monopolies may be against the public interest from different point of views such as since a monopoly firm has an inelastic demand curve (meaning that there is no element of competitiveness) the firm may run inefficient by not operating at minimum average costs. Result of this inefficiency, higher prices will be charged to consumers. Figure 1.2 shows a monopolist's is pricing will above the average costs thus making a supernormal profit. In addition to these problems, monopolies may make the demand curve their own and lack the incentive to introduce new products and varieties. ...read more.

Conclusion

To restrict supernormal profits there may be the need to pose a tax on the monopolist abnormal profits. A liberalization of the market may mean new entrants that compete in the market which will push the monopoly to be more efficient and decrease prices. In Malta this happened in the liberalization of the market once we became European members. For example Benna which produces milk, which was a monopoly now faced competition and is trying to keep up with them with advertising and improvement on the existing products. If a privately owned monopoly is found abusing a lot of its power, it may in certain cases be wise to transfer the company in the hands of the state. Competitive tendering may also reduce monopoly power. For example when the government needs to buy machinery he will issue a tender, not go always from the same company. This will give incentive to the companies to supply quality products at the minimum possible price. Odette Caruana Intermediate Group ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Monopoly. The following is going to discuss that monopoly is always against the ...

    "Managers and workers may take advantage of their monopoly position to use less technique and market knowledge, thus produce less efficiently than perfect competition. This is known as X-inefficiency." (Brownless, C, 1989, P218) Compare to a perfectly competitive industry, assume the same cost and demand curve conditions, the monopolist will charge a higher price for less output.

  2. What is a Monopoly?

    Monopolies can then enjoy higher profits in the long run as rivals have not diluted market share. Monopoly power is created as a result of barriers to entry. There are various types of barriers (Structural, Strategic and Statutory), which prevent rival firms entering the market, some of which are; Patents

  1. Evaluate the role played by barriers to entry in the long run

    So when a new product is released and supernormal profits are being made then they will continue to generate these profits due to the nature of the market and the simple fact that the competition cannot just copy what they have created as it takes time and money to research and develop.

  2. To what extent do you consider monopolies to be in the public interest?

    The monopolist would capture a larger market share as well as being able to maintain its market power. The recent dispute broke out between Russia and Ukraine, when Russian gas monopoly Gazprom said it would cut gas supplies to neighbouring Ukraine unless a $1.3 billion is paid by the end of October.

  1. customer service

    When we sat down ready for take off they all came round to check if we required anything and to see that we were all ok. I think that is good service as there job is too look after their customers and that's exactly what they were doing.

  2. The Importance of the Canadian Airline Industry.

    Hoping to enjoy the deeply discounted fares available in the United States, the Canadian public urged the government to deregulate the airline industry. At first the government responded by encouraging the airlines to offer discounts of up to 35 percent (Goldenberg).

  1. Is the Government to Blame for Higher Petrol Prices?

    China along with India are demanding ever increasing quantities of Oil because per Capita their demand for Oil is much smaller than that of the OECD countries. With few production increasing capabilities at present in India or China all this extra Demand for Oil is coming without any local increase in Supply of Oil.

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    Figure 13 below, illustrates the percentage point change in market share of store sales (2005-2007,) and it can be seen that convenience specialists and independent stores sales have decreased 6 points, while Grocery multiple sales have increased 7 points. Again, the source of the data is The Office of Fair Trading, and is not subject to any suspicion of bias.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work