• 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 ...

    It is shown as figure7: A perfectly discriminating monopoly will continue to increase output as long as MC<P. The consumer is charged the maximum he/she is willing to pay for each unit. The different price of each single unit leads to remove all consumer surplus and take the whole economic welfare.

  2. What is a Monopoly?

    An example of this is the Royal Mail (also known as Consignia), which has had a statutory monopoly in delevering letters for many years. Although this is set to end as the government seeks to promote competition in the industry.

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

    Eventually, when the competition researched the break through, develops and trials the product and finally produces a similar version then supernormal profits will cease however due to the characteristics of these types of markets, where there are high barriers to entry and few business trade, with little information available then this takes time.

  2. The ways in which monopolist can develop are from successful internal growth of a ...

    There are several types of barriers to entry. * Patents - these are legal property rights to prevent the entry of rivals. They give the owner an exclusive right to prevent other from copying their idea; this is valid for 17-20 years. Owner can sell their patents to other business.

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

    One way of attempting to stop this new market from forming would be by cutting prices, so that there would be no incentive to undermine the price set by the monopolist. This way, consumers would benefit from a smaller loss in consumer welfare as well as lower prices.

  2. 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.

  1. The Importance of the Canadian Airline Industry.

    charged, and the ways in which they were allowed to compete (Lazar 13). However, the sharp rise in fuel prices triggered by the Organization of Petroleum Exporting Countries (OPEC) in late 1973, several recessions, and levelling off of passenger traffic growth all contributed to the destruction of the relative stability the industry had enjoyed for many decades (Skene 18).

  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