The History And Background Of Monopoly Economics Essay

September 12, 2017 Economics

1.0 Introduction

Microeconomic is a individual, family, house, or industry as an economic system ‘s units in this specific scientific discipline of economic behaviour. Contrast to macroeconomics, the survey of the aggregative economic system. Chiefly concerned with factors impacting single economic picks, factor alterations consequence on the single determination shapers, how their picks are synchronized by markets, and how monetary values and demand undertaking in single markets. Theory of demand, theory of the house, and production demand for labour and other factors are the chief topics covered under microeconomics.

For this assignment, I need to clarify monopoly and its characteristic. Other than that, I need to distinguish the characteristics of perfect competition, monopolistic competition, oligopoly, and monopoly.

To carry through the undertaking, I need to happen mentions, information and replies from either the books from library or from the cyberspace.

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2.0 Monopoly

2.1 Definition of Monopoly

Monopoly is a market construction in which there is a individual marketer and big figure of purchasers and selling merchandises that have no close permutation and have a high entry and issue barrier. For the intent of ordinance, monopoly power exists when individual house controls 25 % or more of a peculiar market.

2.2 Characteristic of Monopoly

A monopoly is a house that is the exclusive marketer in its market.

Many Buyers

High barriers of entry

Merchandise is alone

Ad is non necessary

Monopolist can command monetary value or measure but non both

For an illustration to the characteristic above, Jabatan Bekalan Air Malaysia is a monopoly house in Malaysia. It is the exclusive marketer in the market. This is due to the house is the lone provider of domestic H2O to the citizen. Therefore, the merchandise is alone and causes purchasers and users to utilize their merchandises because it is an necessities need. Furthermore, there are no other houses that can supply this merchandise. Ad is besides non necessary for Jabatan Bekalan Air Malaysia because it has become a common sense that in Malaysia, we can merely acquire H2O supply from them. Ad in monopoly market is depending on the merchandises sold. If the merchandises are epicurean merchandises or even touristry market, so the monopoly needs some advertisement on their merchandise. Jabatan Bekalan Air Malaysia can besides command the monetary value or measure of their merchandises but they could n’t command both of it together.

It faces a declivitous demand curve for its merchandise.

Like a competitory house, a monopoly maximizes net income by bring forthing the measure at which fringy cost and fringy gross are equal.

Unlike a competitory house, its monetary value exceeds its fringy gross, so its monetary value exceeds fringy cost.

A monopolizer ‘s profit-maximising degree of end product is below the degree that maximizes the amount of consumer and manufacturer excess.

A monopoly causes deadweight losingss similar to the deadweight losingss caused by revenue enhancements.

2.3 Natural Monopoly

Natural monopolies include public utilities, such as gas and electricity providers. Such endeavors require big volume of modal and immense investings, and it is difficult for others to double the merchandises. Due to the importance of it towards the society, it has become legal. In exchange for the right to carry on concern without competition, they ‘re regulated. Therefore, they must follow the controlled monetary value from the authorities and they ca n’t merely bear down whatever monetary value they want. As a regulation, they ‘re required to function all clients, even if making so is n’t cost efficient.

2.4 Legal Monopoly

A legal monopoly is that a company gets an sole usage of an invented merchandise or procedure. Patents are issued for a limited clip, by and large twenty old ages. During this period, other companies ca n’t utilize the invented merchandise or procedure without permission from the patent holder. Patents allow companies a certain period to retrieve the heavy costs of researching and developing merchandises and engineerings. An illustration of a company that enjoyed a patent-based legal monopoly is Casino in Genting Highlands, which for old ages held sole ownership of holding a legal casino in Malaysia. Casino in Genting Highlands supply a legal gamble topographic point for the people without competition, in other words, it enjoyed a monopolistic place in Malaysia.

2.5 Example of Monopoly Firm

Monopoly can be form due to many fortunes, for illustration:

A house that has an sole ownership of scarce resource, such as Linux having the Unix-like computing machine runing system, it has monopoly power over this resource and it is the lone house that can work it.

Governments may allow a house monopoly position, such as with the Post Malaysia Berhad, which was given monopoly position back to the early 1800s with the constitution of postal services foremost in the Straits Settlements ( Penang, Malacca and Singapore ) and bit by bit, it covered the whole Malaya by early twentieth century.

2.6 Monopoly Graph

Super-normal net incomes

Monopolies can keep super-normal net incomes in the long-term. As with all houses, net incomes are maximized when Fringy Cost is equal to Marginal Revenue. By and large, the degree of net income depends upon the grade of competition in the market, which for a pure monopoly is zero. At net income maximization, Marginal Cost is equal to Marginal Revenue, and end product is Q and monetary value P. Given that monetary value ( AR ) is above ATC at Q, supranormal net incomes are possible ( country PABC ) .

With no stopping point replacements, the monopolizer can deduce super-normal net incomes, country PABC.

A monopolizer with no replacements would be able to deduce the greatest monopoly power.

2.7 Decision

Overall, monopoly is a market construction that provides alone merchandise to assorted purchasers that conquers the whole market so that they can keep super-normal net incomes in the long-run.

3.0 Differences between the characteristics of Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly

3.1 Table of Market Structure

In Economics, market construction is the inter connected characteristic of a market, such as degree and signifiers of competition, merchandise distinction, easiness of entry and issue from the market, and the figure and comparative strength of Sellerss and purchaser among them.

Market construction


Number of manufacturer

Type of merchandise

Good and Servicess

Barriers to entry

Non-price competition

Perfect Competition

Partss of agribusiness are moderately near







Public public-service corporations


Unique merchandise

Difficult to replace

Very High


Monopolistic Competition

Retail trade





Ad and merchandise distinction


Computer, oil, steel


Standard or differentiated



Ad and merchandise distinction

3.2 Perfect Competition

A perfect competition is a free entry and issue to industry. It is a standardised type of merchandise and it provides homogenous merchandises like Coca-Cola. It has big Numberss of purchasers and marketer. Other than Coca-Cola, there are other merchandises like Pepsi, Sprite, 7-up and many more. Therefore, no single marketer can act upon the monetary value of the merchandise. Sellers like Coca-Cola are monetary value takers as they have to accept the market monetary value. Net income is maximising when fringy gross equal with the fringy cost. It can do net incomes in short tally but the net income will be nothing when it comes to long tally.

3.3 Monopoly

A monopoly has a high barrier for a company to come in the industry. It is a alone type of merchandise and it is a one marketer to many purchasers in the market. It provides alone goods to the purchaser. For illustration, Jabatan Bekalan Air Malaysia is the lone industry that provides H2O supply to the whole state. This is because H2O is an indispensable demand for every citizens of Malaysia. Monopoly is a monetary value compositor. The max net income is when fringy gross is equal to fringy cost. For this, long-term net incomes can be positive and it will do inefficient result ensuing dead weight loss.

3.4 Monopolistic Competition

A monopolistic competition is a differentiated type of merchandise and many houses selling merchandises that are similar but non indistinguishable. It has low legal barrier entry to the industry. For illustration, Popular is a bookshop that sells books and letter papers. It is a house that viing for the same group of clients. For the merchandise wise, each houses like Popular and MPH, their merchandise is at least somewhat different from each other. Rather than being a monetary value taker, each house faces declivitous demand curve. It is besides a monetary value compositor for monopolistic competition. The max net income is when fringy gross is equal to fringy cost. It can do net income in the short-run where the long-term net incomes are equal to nothing. The inefficient result will consequences in dead weight loss.

3.5 Oligopoly

Oligopoly is an industry that controlled by little figure of big houses. It is either a differentiated or standard type of merchandise. It is besides has a high barrier to come in the industry. For illustration, DIGI Telecommunication is one of it. It is a nomadic service supplier with there is merely a few in Malaysia. The merchandises could be extremely differentiated by branding or homogenous. It is besides a non-price competition. There are 3 types of scheme for this that is Cournot, Stackelberg and Bertrand. Oligopoly is ever max net income when fringy cost is equal to fringy gross.

3.6 Decision

Overall, we can see that there are a batch of differences in these four market constructions. Each types of market provide different types of merchandises and ensuing different consequence in long-term and short-term.

4.0 Decision

In this undertaking, I ‘ve learn on how the market is made up of the certain factors like the figure of houses runing, the nature of the merchandise being produced, the degree of net income, the grade of monopoly that each house enjoys, the houses ‘ behaviour, the pricing scheme, the degree of end product and the efficiency of the market and the entry and issue into the market. All these factors are jointly called as the market construction.


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