Grade 8C Economics
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Case studies based question
Perfect competition is one type of market structure with a number of distinctive characteristics. It is often compared favourably with monopoly.
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Discuss whether pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly.
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Last date for Submission:
March 10rd, 2014
Please Write Your Response in 500 Words
Note:
1. Write with references.
2. Market evidences in support of your reasons.
3. Marks allocation for this article is 20
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks [Use Harvard referencing style]
C. Use of Key words. 5 Marks
D. Examples from various Markets 5 Marks
Grade 8C Economics
________________________________________________________________________
Perfect competition is one type of market structure with a number of distinctive characteristics. It is often compared favourably with monopoly.
- Discuss whether pricing and output policies in perfect competition are more favourable to the consumer than those in monopoly.
Please Write Your Response in 500 Words
Note:
1. Write with references.
2. Market evidences in support of your reasons.
3. Marks allocation for this article is 20
Rubrics for Marks.
A. Theoretical Explanation 5 Marks
B. References. 5 Marks [Use Harvard referencing style]
C. Use of Key words. 5 Marks
D. Examples from various Markets 5 Marks
In a perfect competition, there are a large number of producers as well as buyers. Nobody controls the price of the products and most companies will sell their products at the same price and try to offer the lowest in order to attract more consumers. In monopoly, majority of the market is controlled by one firm, having over 40% of the market share. The bigger monopoly a company bas, the more they will charge their product at higher prices.
ReplyDeletePricing and output policies in a perfect competition is partly more favorable to consumers due to some factors. They are such as firms as the price takers, this means that the firms themselves that control the price of their products which may change any time. Another benefit would be lower selling price due to competition, consumers will therefore able to obtain their goods and services at low price.
There are several reasons for discouraging monopolies, these include restriction of supply and raises revenue, makes excessive profits, inefficiency, less varieties of goods and services, restricts new ideas, limits new products, etc. In most monopolies, the price is set above marginal cost and the firm earns a positive economic profit. The price of a good is higher and the quantity is lower, which is economically efficient. It is therefore, governments often seek to regulate monopolies and encourage more competition.
Perfect competition is also responsive to consumer wishes such as changes in demand which leads to extra supply. Unlike monopoly, which may find it difficult to respond to consumers’ demand and request towards their product. An example of perfect competition would be McDonald and KFC, both are fast food restaurants that are competing against consumers so they try to charge prices as low as possible in the hope of more consumers to maximize profits and boost income.
On the other hand, monopoly also has several advantages to both consumers or economically. Monopoly reduces wastage of resources, it usually uses modern technology in most of the processes. It also enjoys economies of scale as it is the only supplier in the market and that benefit can be passed on to the consumers. The large amount of profits made by monopolies, it can be used for research and development in maintaining their status as a monopoly. Monopolies may also use price discrimination which could benefit the economically weaker sections of the society, such as through discounts or beneficial offers. Also, it can afford to invest in the latest technology and machinery to be more efficient and avoid competition. An example of monopoly would be Apple which is charging its product very high compared to Samsung that are offering range of products from the cheapest to the most expensive. This is because Apple has more durable and advanced applications in their smart phones.
In conclusion, monopoly and perfect competition both have similarities and differences between firms in both sides. Both have the same objective which is to maximize profits. However, monopolies are generally considered having more disadvantages than perfect competition. Although perfect competition gives relatively more favorable pricing and output policies towards the consumers, there are also disadvantages of this matter. So each of them has their own advantages and disadvantages.
100% Originality
References:
https://www.boundless.com/economics/monopoly/monopoly-production-and-pricing-decisions-and-profit-outcome/market-differences-between-monopoly-and-perfect-competition/
http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?#slide=5
http://www.economaldives.net/2012/03/17-pricing-and-output-policies-in.html
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
Thankyou. You have been most helpful.
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ReplyDeleteIn a perfect competition, there are a lot of firms and buyers. This allows the market to not be monopolised by these firms. Because of this nobody controls the firms so no monopoly can happen. Monopoly is when you earn such a large percent of the market share (roughly 40%) that you can control the price of a product and people will be forced to buy it at your price.
ReplyDeletePerfect competition prevents monopoly. This is because both firms will compete to find the best product at the best price and the best quality. If perfect competition doesn't exist people will be forced to buy a company's product for whatever price they want. One example of them are Nike and Adidas, both competing for their consumers.
Monopoly however can sometimes benefit the economy. When there's monopoly, the firms can use that extra profit for research and development. They can also have the ability to reduce the price so poor people can buy their product.
One example of monopoly is the PLN company. They're the only electricity providing company in Indonesia. Electricity is very important so the people will be forced to buy them at whatever price PLN wants. Governments will usually subsidies them to give benefits to the poor people using the money of the rich.
In conclusion monopoly can benefit the economy and consumers but not as much as perfect competition. Monopoly will increase profit and beneift the firm more while perfect competition will reduce profit and give the consumers cheaper products.
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http://business.blurtit.com/355927/what-are-the-advantages-and-disadvantages-of-perfect-competition
Perfect competition is the competition in which the market has lots of producers and also lots of buyers. Where as monopoly is when one company rules the market or majority of the market shares are own by one company. Monopoly is when there are no competitions in the market.
ReplyDeleteTo consumers, pricing and output policies of perfect competition are definitely more favorable than the pricing and output policies in the economy. In perfect competition, firms compete to gain monopoly in the marker. When firms compete, consumers will be benefited from competition. There are many benefit of competition to the consumers.
When there is competition, the firms will be producing a wider range of products. Wider range of products gives consumers more freedom to choose the most suitable product for them. When firms compete, they will strive to provide the minimal price to be sold to consumers. So, consumers can buy products at cheaper price in a competitive market than in a monopoly. In a competitive market, there will be a more frequent increase in technology since many firms are competing. Consumers will have perfect information on these firms’ products.
Firms can also benefit from perfect competition. Firms will be more motivated in a competition because they are all competitors striving to gain monopoly. Example of firms in a perfect competition is Apple and Samsung. These companies are motivated to invent more and innovate which satisfies customers for them to buy.
Monopoly is when there is only one producer/seller and many buyers. When there is only one producer in the country, the consumers can only buy products from that producer. By that, the producer can set their products in any price since they’re the only producers. The government owns most firm in a monopolistic market. Example is here in Indonesia, Pam Jaya and PLN. The prices set by those firms should be acceptable since they’re the only one producing.
Firm in a monopolistic market will surely have more profit. Firms in monopoly apply economies of scale. This is when a firm buys materials and a large quantity in a cheaper price. Applying economies of scale increases profit. Monopoly brings both advantage and disadvantage to customers. There won’t be much information about product of the monopolistic firm. Monopolistic firms may bring higher prices to low quality goods for consumers. To the firm itself, lack of competition results in low motivation. An example of a monopolistic firm is PLN. It supplies electricity for Indonesia. In any prices set by PLN, people will still have to apply the price to get PLN’s service. PLN isn’t really developing through the years but is still a monopolistic company.
My conclusion is that both perfect competition and monopoly brings advantage to customers but perfect competition is more favorable since it brings most advantage to customers whereas monopoly brings most advantage to the company itself.
Kevin 8C
References:
• http://www.tutor2u.net/economics/content/topics/monopoly/benefits_of_monopoly.htm
• http://www.tutor2u.net/economics/content/topics/competition/competition_importance.htm
Originality 100%
Perfect competition, or also known as pure competition, describes a market structure where competition is at its greatest possible level. In a perfectly competitive market, there will be large number of firms competing to supply an identical product and a large number of consumers demanding it – all producers and consumers will exchange at the equilibrium price market. It is a market structure where all buyers and sellers can freely enter or leave the market. All firms will also have relatively a small market share.
ReplyDeleteGenerally, speaking of pricing, a perfect market competition is more favorable for consumers than monopoly, because they are price takers. Monopoly restricts market supplies to force up market prices and earn excess profits. Talking about output, perfect market competition is also more favorable to consumers compare to monopoly, as in monopoly market has no competition, products’ quality may not be really good.
A perfectly competitive market, all firms would sell there products as low as possible, but still gaining some profits, as there are a large number of firms producing identical product. Therefore, firms and consumers would not be able to have the power to influence the market price. They are called price takers. If a firm would increase their prices, above market price, they might lose come customers as their price are higher than the others. Consumers in a perfectly competitive market know well about the information of the product, as well as the price charges for each product.
However, perfect market competition don’t have reason for technology development, minimization of profit, absence of product choices, no economies of scale and changes in production might have some loses.
On the other hand, a monopoly market is a market structure where there is only a single producer that is selling a unique product in the market that no other firms provide. In a monopoly, producers don’t seem to have competition, as they are the only producer providing goods and services in the market. In a monopoly market, they can restrict market supplies to force up market prices and earn excess profits.
The disadvantage of monopoly to consumer is that consumers may be charged high prices for low quality of goods. In a monopoly market, firm will not face competition. This may disadvantages to consumers as lack of competition may produce low quality of goods. Consumers will also have less choice because the restricting competition from rival producers.
As the conclusion, perfect market competition is favorable for consumers in terms of pricing and output policies. Consumers couldn’t have advantages in monopoly market, as they consumers do not have control on the price of the product.
References:
Economics textbook
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://economictimes.indiatimes.com/definition/monopoly
http://www.ask.com/question/advantages-and-disadvantages-of-monopoly
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
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A market are structured differently depending on the characteristics of competition within the market. On one extreme is perfect competition. In a perfectly competitive market, there are lots of consumers and producers, no walls to exit and enter the market, perfect goods, informations are perfectly distributed, and rights of the property are well designed. This creates a system in which no economic individual actor can affect the price of any good, producers are called price takers that can control how much to produce, but not the price they sell their outputs.
ReplyDeleteA monopoly, on the other extreme, exists when there are many consumers but only one producer. Monopolies are characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. As a result, the single producer has control over the price of a good, the producer is a price maker that can determine the price level by deciding what quantity of a good to produce. Public utility companies tend to be monopolies. In the case of electricity distribution, for example, the cost to put up power lines is so high it is inefficient to have more than one provider. There are no good substitutes for electricity delivery so consumers have few options. If the electricity distributor decided to raise their prices it is likely that most consumers would continue to purchase electricity, so the seller is a price maker.
Monopoly and perfect competition mark the two extremes of market structures, but there are also some similarities between firms in a perfectly competitive market and monopoly firms. Both face the same cost and production functions, and both objective is to maximize profit. The shutdown decisions are the same, and both are assumed to have perfectly competitive factors markets.
However, there are several key distinctions. In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition creates an equilibrium in which the price and quantity of a good is economically efficient. Monopolies produce an equilibrium at which the price of a good is higher, and the quantity lower, than is economically efficient. For this reason, governments often seek to regulate monopolies and encourage increased competition.
So, in conclusion, there are many benefits of both perfect competition and monopoly, they have many similarities, but monopoly could be more benefitial because the price of the goods are higher than in a perfect competition. Firm in a monopolistic market is more benefited than the firm in a perfect competition market.
References:
-http://en.m.wikipedia.org/wiki/Perfect_competition
-economic IGCSE book
-economic corner notebook
originality 85%
Perfect competition is basically when a market is able to set a very good price for their product to attract consumers to buy their product. There are usually many companies selling the same product with different brands and prices, but consumers of course will choose the one with the best price. That is why in order for firm to attract consumers, they have to do this.
ReplyDeleteConsumers benefit of having this perfect competition because of course all the firms will always try to have lower price for attracting and therefore, consumers can be able to obtain the product with a low price. Besides price, consumers will also see the product. They will obviously pick the best quality product. In this case, companies will try to produce better goods which is good for the price each time. And by these different competitions that are always present, companies will always try to produce better good(s) and finally, consumers will be satisfied. “Aqua and cleo” is an example of perfect competition. They both are same, but they keep competing for lower price.
Besides, a monopoly is actually a market with only single firm and has high market share where price is also high. Monopolies are usually present in high tech companies such as apple and Samsung. They both have high prices due to the high tech and market share. Monopoles don’t compete with each other. This shows that each monopoly just try to attract consumers without thinking of others. They don’t care about others, just their company.
People are generally more interested in perfect competition than in monopoly. This is because monopoly usually has poor level of service. They don’t take suggestions from consumers. They just create whatever they’ve already planned. And beside that, their products are expensive, consumers aren’t attracted to goods with high prices. Other thing is that they don’t compete with other monopolies. By not competing, then they’ll not try their very best in making the new product. Some consumers might be bored that they don’t make better and better ones.
Yet, monopoly sometimes give us advantage too. A monopoly doesn’t usually duplicate other’s product. So that is why different brands in monopoly aren’t same with other brands. Lets take an example of apple and Samsung. We can be proud of ourselves of buying apple product rather than Samsung and we can show it off to someone else who owns Samsung. A monopoly also enjoys economies of scale. This is an advantage for consumers too. Monopolies also give discounts sometimes. And by having discounts, the consumers will purchase the product in lower price(s).
So after making this summary of perfect competition and monopoly, here’s my conclusion. Theres no big differences between perfect competition and monopoly. But consumers still demand more on perfect competition. Because the disadvantages of perfect competition are less than the ones in monopoly. Yet, people have different opinions. Some love perfect competition more, and some choose monopoly either.
Source: http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly
Originality:
http://plagiarisma.net/ : 98%
Jacqueline 8C
There are different types of market structure, two opposite extremes are perfect competition and monopoly. Perfect competition is being recognized by many buyers and sellers where similar products are present, resulting substitution. Compared to monopoly, having one producer for a product or a single business is the market.
ReplyDeleteConsumers may be satisfied buying in a perfect competition market as there is a wide range of products and prices according to their needs, preference and budget. Most producers sell their products with low prices as they aim for greater sales to earn maximum profit in the long run.
Price of goods and services in a perfect competition market is usually based by supply and demand. If a firm decided to escalate its price, consumers can go to the nearest rival for a better and cheaper price, causing any firm that rise their selling price to lose profit and market share.
Firms may achieve productive efficiency in the long run. Productive efficiency is attained when price is equal to average cost (AC) at its lowest level. This cannot be reached in the short run as a company can be operating at any point of average total cost. In the long run, more economic efficiency is obtained with favorable levels.
Consumers may be intimidated by having plenty of options, especially to those who are not interested in trying new brands. The prospect of earning and lay hold of the business of each purchaser is declined. This may limit the entry of new businesses coming in to the market.
Competitive market like a perfect competition market may avoid a monopoly market to grow. As a marketplace like monopoly leads to greater drawbacks to consumers.
As in a monopoly marketplace, there is one market leader ruling over many other companies. Prices of goods and services may be exceled to higher than average. Consumers may need to pay higher prices due to absence of competition.
Having one company leading the market, consumers don't have a wide range of products to choice from. Purchasers may not be satisfied as they less choice to choose from.
Less innovation of products may occur as a leading firm might not be able to obtain new ideas or new methods from other firms. This may be a disadvantage for a consumer too as they cannot buy products with greater efficiency.
Market leading firm may make higher profits as it doesn't have competition and consumers are forced to buy their goods and services.
Consumers may stumble upon more benefits in a perfect competition marketplace compared to a monopoly marketplace.
Reference:
http://www.investopedia.com/university/economics/economics6.asp
http://www.wisegeek.com/what-is-perfect-competition.htm
http://tutor2u.net/economics/content/topics/competition/long-run_output.htm
http://www.tutor2u.net/economics/gcse/revision_notes/firms_monopoly.htm
Originality (according to grammarly.com) : 95%
Monique 8C
First of all, a perfect competition consist of a lot of buyers and producers, and the prices reflect the supply and demand. On the other hand, monopoly is a specific person or enterprise that sell or produces the only particular commodity.
ReplyDeleteA monopoly is controlled by one firm. Therefore, the bigger the company is, the higher the prices will be. Also, pricing and output policies are more favourable for the consumers than monopolies. One of the reasons is because change of price. In a perfect competition, a consumer will have the ability to consume a product with a good quality and a low price. Meanwhile, in a monopoly, a consumer will not be able to consume a product with a low price. A monopoly will provide a suitable price that is available for all people since it is the only company that produces that type of product. For example, Meralco, which is the only supplier and biggest company in the Philippines.
Second of all, in a perfect competition, many different types of products will be sold. Which will also catch our attention to try out different products. For example, Iphone is not only producing phones but also different types and utility androids, computers, laptops and etc. On the other hand, monopoly only focuses on one type. For example, a company that produces water supply. Their main business objective is to produce water supply and not other products that are not related to that.
However, even though a perfect competition may bring benefits to consumers. A monopoly is not bad itself. It has its own advantages as well.
One of the advantages of a monopoly is that it has a large economies of scale and productivity. Since it is the only company or brand that produces that type of product, there will be a higher demand. And therefore, a higher demand will result a higher supply. Therefore, it will increase its productivity of the company.
Second, the size of the company is big. Again, it is because it is a monopoly company. it will also have a high earning of profit which will help the company reach profit maximization. This is because there will be many people who will buy the product which will earn more profit. However, the company will still provide a better price for those who could not afford it but still needs it such as, electricity, water supply and more.
Last but not least, it can obtain a higher development and research. They will have a higher investment on capital, asset and more. This will be able to happen because they have a higher profit that they earn and can use them to improve a better facility in the company to increase the producitivity, utility and more that will satisfy and attract more consumers.
Overall, a perfect competition will provide advantages for the consumers. However, a monopoly itself will have an advantage as well over perfect competition. But a consumer will have more advantages in a perfect competition compared with a monopoly.
Reference:
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://en.wikipedia.org/wiki/Monopoly
http://ph.answers.yahoo.com/question/index?qid=20130521033615AAd7Wyz
http://prezi.com/dwxkjjodtgmu/advantages-and-disadvantages-of-monopoly-compared-to-perfect-competition/
http://au.answers.yahoo.com/question/index?qid=20090511055020AAI2Dxt
ORIGINALITY: http://plagiarisma.net/ - 91%
Perfect competition is the opposite of monopoly. A perfect competition have many buyers and sellers. The price are taken by the demand and supply of the product not by the buyers or sellers. The example of perfect competition is Toyota and Honda that both of them are a car manufacturer.
ReplyDeleteIn the other hand, monopoly is single company or group owns all of themarket for a goven type of productor services, in which the price are taken by the sellers. The example of monopoly is PT.Kereta Api Indonesia since there is only one company that provide a transportation of train services in Indonesia.
The advantage of perfect competition for consumers are firm is price taker, consumers have informations about the product being sold and prices charged by each firm, and no barriers to entry and exit.
Firm are price takers which means that the company and consumers are not able to control the price of the product since the price of the product is reflect by the supply and demand of the product.
Consumers have informations about the product being sold and prices charged in each firm which make the consumers know of the market value of that product and make them choose thecheapest product with the best quality.
No barriers to entry and exit means that consumers can easily got the information about the product and price of the product also knowing the quality of the product in each company.
Oppositely, in a monopoly, a consumer may be disadvantage. Because usually in monopoly, the firm itself controls the price of the product.
If a firm itself controls the price of their product, the company will try to make the highest price that they could to earn maximum profit and consumers should buy that product in high price since there is no any other company that sells the typically type of that product.
In conclusion, both of them actually have an objective to maximize the profit, but monopoly can really maximize their profit since they are the one who control the price of their product whcih actually is not favorable to consumers because firm usually give a high price and consumers should buy that product from that firm in the high prices, but in perfect competition, a firm is not able to maximize their profit since they also have many competitors in which the price is reflected by the demand and supply of that product whcih make the conusmers feel more favorable because though the firm put a high price, consumers are able to buy the same product from another firm and that firm will not able to survive in business.
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Sources :
http://www.investopedia.com/terms/p/perfectcompetition.asp
http://www.investopedia.com/terms/m/monopoly.asp
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
A perfect competition includes many buyers and sellers, in which prices reflect supply and demand. In a perfectly competitive market there will be a huge amount of different firms compete to supply similar products and the same amount of the many customers that are willing to buy it. No firm or customer will have the power to influence the market size. Therefore, they are price takers. There are many firms in the market.
ReplyDeleteA pure monopoly is the opposite extreme of a perfectly competitive market. In this case, one or more firms may have sufficient market power to limit competition and influence the price and quantity traded through their willingness. Therefore, they are known as price maker. There is only one producer and seller for a product.
Perfect competition doesn't really involve any competition - since the products are identical, all firms have the same average costs and have to accept the same market price.
Because of the high degrees in competition, it helps resources to be distrubuted to the most efficient user. High efficiency will be implemented on these markets. As price takers, who aren't able to decide on the prices, therefore the market can't make any abnormal profits in the long run. It has few barriers of entry and exit and has incentives to cut costs.
A perfectly competitive market benefits its consumers in the terms of quality and pricing, and after-sales services. Services and quality will tend to frequently change as firms develop new ones, hoping will attract consumer demand away from other products.
Monopolies, who are able to exert influence or control over the price and market supply, will have numbers of disadvantages for consumers. Examples of monopolistic economies include a restaurant business, hotels and pubs, and other consumer services such as hairdressing.
Firstly, it gives off less consumer choice, by restricting competition from it's rivals and others that would occur in a competitive market.
A monopoly may restrict market supply, and then setting a higher market price, that otherwise would occur in a competitive market. The total output decreases and prices rise, by which also reduces consumer demand for it. Consumers with very little choices may have to continue buying the product of the monopoly or simply go without.
Due to it facing little or no competition, the monopoly can be given to have no great incentive to increase the quality of good or service it produces, so that it could face better sales than the competitor. Instead, the monopoly may reduce quality so that it reduces its production cost to increase their profit margins.
As the factors mentioned above, a monopoly is less favoured to customers for pricing and quality of the output, compared to a perfect competition. It is due to monopolies having less consumer choice, high prices that are set up by the firm, and with a lower product quality and efficiency. A perfect competition, on the other hand, doesn't let both sides of a firm and consumer, to pick on the prices. The prices are set up effectively and quality and service is given solemnly, due to the other fact that it is willing to beat its competitors. Monopolies, on the other hand, doesn't have as much competition, which can contribute as a factor of its outputs.
References:
http://economicsassist.wordpress.com/2013/06/03/advantages-and-disadvantages-of-perfect-competition/
http://www.whatiseconomics.org/microeconomics/perfect-competition
https://economicsonline.co.uk/Business_economics/Monopolistic_competition.html
Economics textbook
Originality: 100%
Perfect competition is a theoretical market structure. It is primarily used as a benchmark against which other, real-life market structures are compared. The industry that most closely resembles perfect competition in real life is agriculture.
ReplyDeletePerfect competition is the opposite of a monopoly, in which only a single firm supplies a particular good or service, and that firm can charge whatever price it wants because consumers have no alternatives and it is difficult for would-be competitors to enter the marketplace. Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. Also, consumers have many substitutes if the good or service they wish to buy becomes too expensive or its quality begins to fall short.
In my opinion pricing and output strategies to attract customer in perfect competition side is better because in perfect competition there is many producer and consumers so there is competition happen in order to increase profit and market share competition will also benefited the consumer and the firms.
When the firm do competition they will try to attract consumers by price and also output given for the price, they also make a better and new product and try to minimize the price so consumers will be satisfy and be a loyal customer to the company.
Firm also get benefited from the perfect competition , because of they need to make a new product for example apple launch the finger print technology , samsung also launch their newest technology by face recognition and also eye recognition
Monopoly is when there is only one company produces services to all of the consumers no other company produce the same services for the example is electricity provider in Indonesia is pln for the electricity company they only have one and its control by government so people will use pln services even-though the price is high because we need electricity for daily life
So in my opinion in monopolistic market output and pricing strategies is less needed because people also uses our product eventhough the price is high or low.
Refferences:
Notebook
Investopedia
Michael f.d
Monopoly is when a company rules over many companies or it is the only company that provides that kind of service over a particular area. A competition is when some companies are competing to be the most success or has the most customers to win the competition.
ReplyDeleteIt is however more favorable for monopoly. Because the consumers can't choose any other products in that particular area because that company is the only company providing the product, there is no variation in products and the prices is also played by the monopoly whatever the price the company want to set up.
Example of monopoly is the electricity, we can't choose any other companies, only one company we can choose, only PLN( Perusahaan Listrik Negara). The prices is also PLN who set, we can't choose any other electricity sources that is cheaper in that area because that it the only firm in that particular area who provides electricity.
And it's less favorable for the competition in pricing and outputs policies. There are wide range of products and many variations of products. So the consumers may choose any of the products that they want to buy. There are many companies who produce that kind of product in that particular area. The companies in competition can't set up their own price as high as they want because other companies may set lower prices and all the customers will only go to that company who provides lower prices.
Example for the competition is the TV cables, there are very many types of TV cables that we can choose. There are Fastnet, OkeTV, OrangeTV,Indovision, and also Firstmedia. We can choose between all of the products which one is cheaper, which one provides better quality of products or channel, and who provides more channel between all the firms.
So I can summarize that, with monopoly, there is more benefits for the firms because they will have more customers because it is the only company in that area who provides the product but there are also drawbacks if there is advantages. In competitions, I don't say that the firm will not get any advantages, they will bet but the customers will get more benefits because all the producers are competing to get more customers and they will make the price lower but the companies will not make them become making a loss.
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DeleteReferences:- Economics books
- Economics corner notebook
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