What is monopoly and monopolistic competition ? EduRev Commerce Question

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One can define the market as a place where two or more parties meet for economic exchange. It facilitates the exchange of goods and services, and it can be a physical place like a retail store where people meet face-to-face or a virtual one, i.e., online e-commerce websites. There are buyers and sellers in a market which determines the size of the market.

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More presence in the market makes the brand much stronger and competitive. Now choose the location for which you want a monopoly-based PCD pharma franchise from our company. A monopoly gives you the chance to take up the location of your choice for the distribution of quality pharma products so that you can work as per your planning.

Natural monopoly is a situation that originates from natural causes. It also shares monopoly features such as the production of a unique good, price and quantity difference, and entry restrictions, among others. Natural monopoly provides the industry with the distinct advantage of producing the product at a lower cost. This particular instance aids them in gaining a larger share of the market. A natural monopoly is a market in which the experience of the sellers rises the sales of their products in their company and with the higher fixed cost. The advantage of the cost framework shall be availed by these salespeople and develop them quickly.

Such conditions can either be beneficial in terms of regulation and administration or can put the consumers at a significant disadvantage. The reason being that a company in a monopoly set up is completely free from fear of going out of business. When you’re the only seller, there is no one else to steal your business which allows these enterprises to be inefficient. No competition also allows the firm a lot of liberty in setting price and supply giving them a lethal advantage. When you can set your own price giving people no choice but to buy, your firm is profitable irrespective of the situation.

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This dominance results from superior products and various proprietary technologies that help them gain a competitive advantage. A single company or conglomerate grows large enough to become the owner of all or nearly all of the market for a particular type of product or service. A market for the product would include supplies, infrastructure, materials or services used to make the product. Therefore the term monopoly signifies an entity that has complete or close to complete control of a market. As a result, monopolistic markets seldom succeed in limiting output or generating above-average profits in the long run.

As a result, they are more likely to set their prices higher than competitors. The single seller can’t raise prices above their costs of production. If they raise prices below their costs, the competition is forced to lower theirs.

For example, government regulators may enforce minimum wage laws or promote the development of new businesses in the industry to increase competition and improve workers’ bargaining power. In some cases, government intervention may be necessary to prevent the negative effects of a technological monopoly. Thus, monopoly refers to a market situation in which there is only one seller of a commodity. A monopoly refers to an economic situation where a specific company and its product offerings dominate a sector or industry. Monopolies usually result from the free-market capitalism and the absence of any restriction or restraints on that company. Because there is no competition, monopolistic enterprises will be unmotivated to develop and enhance their products.

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Due to the lack of items on the market, customers would be unhappy. Ultimately, a monopoly is a dangerous situation for all except the owners of the company. Since monopoly is also accompanied by all the labor force being employed in one place, it puts workers in a difficult situation without being out of their respective jobs. The only advertising a company needs to do is make consumers aware of their product. There is no need for the usual product feature show off or any of its accomplices in conventional advertising.

The existing seller, with a wide customer base, might enjoy economies of scale that a new business might not achieve in the initial years. This might discourage potential sellers from entering the market. When you choose a monopoly based PCD business, you get the freedom to choose the market of your choice. Additionally, you can choose the range of products which are high in demand in your targeted area. The company also provides information about the demand of products in specific areas.

• A monopolized product’s cross elasticity of demand is either zero or negative.
• A monopoly is the type of market in which only one person sells a specific product with no comparable alternatives.
• A legal monopoly is a monopoly granted by the government, either through legislation or through the grant of a franchise or a charter.
• A monopoly market is a market structure wherein there is only one seller of a product, and the seller sells a unique product.

With over 5 years of experience in the financial industry and insatiable curiosity, I bring complex financial topics to life in a way anyone can understand. My passion for educating others shines through in my approachable writing style. Similarly, before satellite and cable TV were popularised, the Government had a monopoly in the broadcasting business. We at Servocare Lifesciences aims to provide better medicines to ensure a safe and healthy life.

For example, in a labor market monopsony, the single employer can set wages, and workers have limited options for finding employment. This can lead to lower wages and reduced competition and limit the incentives for workers to acquire new skills and improve their productivity. A legal monopoly is a monopoly granted by the government, either through legislation or through the grant of a franchise or a charter. A legal monopoly allows the company that holds it to have exclusive control over a specific market or product and to limit competition in that market. However, the abuse of a dominant position by the firms will be taken seriously and it invokes the attention of the CCI. Such firms can abuse using discriminatory practices either against consumers or producers.

Therefore, the firm that dominates a monopoly market will be able to maximise its profits while maintaining its position as a dominant seller. There is only one seller in a monopoly market, and there is no competition. There are no substitutes for that product, and a monopolist firm can set a higher price than its competitors.

Monopolies have significant market power, and they can restrict the quantity sold and raise prices beyond the competitive level without losing customers. Results in higher prices, which allows the monopolist to set their prices. Price discrimination occurs when one corporation sells the same product to one kind of shopper while other companies are forced to compete with them to survive.

Hindustan Zinc was established in 1966, giving it a wealth of experience in the mining and smelting of zinc and lead, spanning more than half a century. HZL is one of the lowest-cost producers of zinc in the world, and it is India’s only integrated producer of zinc, lead, and silver. It was ranked number one in the Metals and Mining Category in the Asia Pacific region of the Dow Jones Sustainability Index for 2019. Buyers will have to accept pure monopoly pricing, no matter how unfair it is. It’s quite ironic that the word monopoly has different types, but to name a few, we have broadly classified monopoly into seven different types. Translation, meaning, definition, explanation and examples of relevant words and pictures – you can read here.

The total stock of money circulating in an economy is the money supply.

Based on competition, the market is divided as perfect competition and imperfect competition. Further, there are three types of imperfect competition, monopoly, oligopoly and monopolistic competition. Many people have trouble in understanding the difference between monopoly and monopolistic competition, so here we’ve simplified it for you. The monopoly rights offerings are effective for the growth of the business. As it requires the least amount of investments as well as providing a monopoly leads to hard work and efficient services all over the country at less cost.

The majority of these businesses engage in constant development in order to provide more items to consumers at a reasonable cost. A high barrier to entry/exit for new players characterizes a monopolistic market. Government licensing, copyrights and patents, resource ownership, and high beginning costs are all hurdles in a monopolistic market.

In the case of a monopoly, however, there are no substitutes for goods produced rendering the business in monopoly the sole source of the commodity. The monopoly has information and a lack of substitutes, which makes the firm’s price curve more elastic. Monopolies also eliminate the difference between a firm and an industry since there are no close substitutes for one product.

The Company, which is India’s largest FMCG Player, has an established market position in the majority of the product categories in which it is present. Entering with the monopoly-based PCD Pharma Franchise Business helps in crossing the International Boundaries. It helps in making the company more competitive in terms of boosting the terms of growth and development.

Barriers to entry can be legal barriers, as in the case of industries that require licenses from the government. They can also be financial, as in the case of the telecom industry where investment requirements empty a hole in your pockets, wallets and the bank you would need a loan from. The individual control of the market in a monopoly market structure is due to the following sources of power.

They can either determine the price of their products or let the demand curve determine the output that would be sold. Alternatively, they can determine the output and let the price be determined by consumer demand. Not only in the pharma sector, this is a matter of concern in almost all businesses. Monopoly rights ensure that there is a lower competition amongst distributors of the same company in the local area. It is the company’s duty to ensure that there are no distributors of the same company in the targeted area. The effects of a monopsony are similar to those of a monopoly, but they occur on the side of the buyer rather than the seller.

This is, in many ways, an argument against high prices, not necessarily monopolistic activity. When the corporation begins to create an additional unit of output above a particular threshold, the average per-unit cost will rise. This earnings may be used to support high-capital research initiatives, allowing the firm to bring more creative items to market. Successful research will yield the firm larger revenues in the long run. He is referred to as a “market price-maker” because he has the ability to raise or lower product prices without regard for the actions of competitors.

Google, for example, enjoys a near-monopoly in the search engine sector. Google is constantly updating its platforms in order to improve the user experience. Take the Indian railways, who do a minimal advertisement simply to let people know of new schemes and offers undertaken by them. There are no marketing campaigns directed at extolling the virtues of the Indian railways, simply information campaigns . When most people hear the term monopoly, they think of the board game with the fake englishman on the board. Surprisingly enough, a monopoly in economics refers to something different.

It also indulges in unfair competitive practices that erect high entry barriers for other firms into the industry or market. A monopolist company is the single supplier of all market production. As a result, the monopolist may demand a greater price than if the market were competitive. Companies with monopolistic power are seen to be the most effective and dynamic.