Monopoly - market structure - managerial science
- 1. Novela, Jasmine Venzuela, Reaya Gabrielle BSAIS 2A Monopoly in Market Structure
- 2. What is a Monopoly? The word Monopoly is a Latin term: ‘Mono’ means Single and ‘Poly’ means Seller. A monopoly is a market structure with a single seller or producer that assumes a dominant position in an industry or a sector. Monopolies are discouraged in free-market economies because they stifle competition, limit consumer substitutes, and thus, limit consumer choice.
- 3. What is a Monopoly? A monopoly is a market structure that consists of a single seller or producer and no close substitutes. A monopoly limits available alternatives for its product and creates barriers for competitors to enter the marketplace. Monopolies can lead to unfair consumer practices. They are discouraged in free-market economies. Some monopolies, such as those in the utility sector, are government regulated.
- 5. TYPES OF MONOPOLY Created by the government through laws or regulations, restricting competition to a single entity. Occurs when a single firm can supply a good or service more efficiently than multiple firms due to high fixed costs and economies of scale. 1. Natural Monopoly 2. Legal Monopoly (Statutory Monopoly) 3. Technological Monopoly Arises when a company has exclusive rights over a technology or innovation, often protected by patents.
- 6. TYPES OF MONOPOLY Owned and operated by the government to provide essential services. 4. Government Monopoly 5. Pure Monopoly A situation where a single firm is the sole provider of a product with no substitutes. 6. Geographic Monopoly Exists when a single company dominates a market due to location or lack of competition. 7. Private Monopoly A monopoly owned by private individuals or corporations without government intervention.
- 7. Causes of Monopoly Formation Government Regulations and Licensing– Some monopolies are created by government policies to control certain industries (e.g., utilities, railways). Control Over Resources– A company that controls essential resources can monopolize the market. Economies of Scale– Large firms can produce at lower costs, pushing smaller competitors out. Technological Superiority– Some firms dominate due to superior technology or intellectual property.
- 9. Characteristics 1. A Lack of Substitutes One firm producing a good without close substitutes. The product is often unique. 2. Barriers to Entry There are significant barriers to entry set up by the monopolist. If new firms enter the industry, the monopolist will not have complete control of a firm on the supply. These barriers imply that under a monopoly there is no differ ence between a firm and an industry. 3. Competition There are no close competitors in the market for that product.
- 10. Characteristics 4. Price Maker The monopolist decides the price of the product since it has the market power. This makes the monopolist a price maker. 5. Profits While a monopolist can maintain supernormal profits in the long run, it doesn’t necessarily make profits. A monopolist can be a loss-making or revenue-maximizing too. This is not possible under perfect competition. If abnormal profits are available in the long run, other firms will enter the competition with the result abnormal profits will be eliminated.
- 12. Advantages Encourages innovation due to high profits. Can lead to economies of scale, reducing costs over time. Stable pricing due to lack of competition. Disadvantages Higher prices for consumers. Lack of choices and reduced product quality. Inefficiencies due to absence of competition.
- 13. Thank You