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In society, the world of business is operated and separated into certain market forms that lay the groundwork for a specific infrastructure which lies within the different economical market systems. Through the view of economics, the science which studies human behavior as a relationship between ends and scarce means which have alternative uses (Deuriarte), the main criteria by which one can distinguish between different market forms are based upon several specific categories. Such categories may distinguish the type of market system involved within the criteria depending on the outline structure that leads an individual to answer an economists most basic queries; the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely. After careful research and understanding of the economical degree of measure, certain, major forms of markets clearly stand out above all; a monopoly, oligopoly, and the monopolistic competition.
Each market structure consists of diverse characteristics; a monopoly is defined as a persistent market situation where there is only one provider of a kind of product or service. In contrast, oligopoly is a market form in which a market is dominated by a small number of sellers. Furthermore, the monopolistic competition is a common market form where many markets can be considered as monopolistic ally competitive, because there are many producers and many consumers in that given market. Still to this day, monopolies exist in our economy and thus set certain standards that portray the lack of economic competition for the good or service in that particular market. However, several important monopolies are prevalent that justify certain factors discussed, a pure monopoly which is a market whose sales are completely attributable to a single firm (Deuriarte 125) and a natural monopoly which is able to produce at the cheapest cost for society by virtue of its history and experience in the market and therefore is relatively free from any serious threat of entry by new firms (Deuriarte 125).
In a pure monopoly, the telecommunications industry has illustrated the ability to produce high profits and excessive revenue throughout the industry, allowing for the price setting power to be evident which establish authority standards and procedures that dictate the market. Thus, assuming that the firm aims to maximize profits (where MR = MC), one can establish a short run equilibrium as shown in the diagram below. The profit-maximizing output can be sold at price P 1 above the average cost (AC) at output Q 1. After observing the situation in careful detail, the firm is making abnormal "monopoly" profits or economic profits shown by the yellow shaded area. The area beneath ATC 1 shows the total cost of producing output Qm. Total costs equals average total cost multiplied by the output.
After sincere observation of the market trend, a firm by the name of Microsoft can readily be applied to such an argument. Microsoft is an ideal example of what a monopoly is defined as because it dominates the technology industry because of the capability to lure all competition to failed success in the market. Microsoft power is infinite and the profits continue to increase in patterns where no firms can compete even if they attempt to. In regards to the matter, constraints exist and a monopoly firm such as Microsoft pertains zero capacity for any substitutes or any products in that market that can possibly come to any relevant equivalence to the primitive goods. On the contrary, oligopolies differ because there are a few participants in this type of market, each firm is aware of the actions of the others.
Thus, oligopolistic markets are characterized by interactivity because the decisions of one firm influence, and are influenced by, the decisions of other firms. Furthermore, strategic planning by firms always involves taking into account the likely responses of the other market participants (Deuriarte). As a quantitative description of oligopoly, the four-firm concentration ratio is often utilized. This measure expresses the market share of the four largest firms in an industry as a percentage. Therefore, in an oligopoly, firms sales and revenue is calculated as a market share to the industry as a whole. For example, the industry revenue of twenty million dollars is calculated, but one firm has five million dollars of the revenue, which clearly explains that the firm has a twenty five percent market share.
As a result, firms utilize non price competition in order to accrue greater revenue and market share. In such a market system, a cartel can possibly form where oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may possibly collude to raise prices and restrict production in the same way as a monopoly. Certain few examples of oligopoly in the economy are prevalent in foreign countries in business sectors of automobile industry, consumer goods, and the steel production. A monopolistic ally competitive firm acts similar to a monopolist in the short run. This is due to the fact that the firm faces a downward-sloping demand curve, unlike the horizontal demand curve an individual firm faces in a perfectly competitive market.
The firm simply produces the quantity that maximizes economic profit. This occurs at the intersection of the marginal revenue and marginal cost curves. However, this situation does not exist for very long because as other firms notice that there is profit to be made, they will enter the market as there are no barriers to entry, unlike in a monopoly. Conversely, if firms are actually incurring losses, then they will exit the market. This fluctuation in supply will continue until firms are making zero economic profit (but firms would still probably record accounting profit) and the quantity demanded is at the point on the demand curve where price equals average total cost. Unlike in perfect competition, the firm does not produce at the lowest attainable average total cost.
Instead, the firm produces at an inefficient output level, reaping more in additional revenue than it incurs in additional cost versus the efficient output level. While monopolistic ally competitive firms are inefficient, it is usually the case that the costs of regulating prices for every product that is sold in monopolistic competition by far exceed the benefits; the government would have to regulate all firms that sold heterogeneous products - an impossible proposition in a market economy. In conclusion, after careful observation, the various market forms in the economic system are the fundamental infrastructure that maintains the product supply and demand in different industries. Whether a monopoly with one firm, an oligopoly with two or more, or a monopolistic competition composed of many firms, a degree of economic analysis in respect to the business world is available. Each must be governed and regulated by the government in order to maintain a stable economy and offer opportunity to get potential profits. So as the question implies unfair labor laws or great businessmen at work?
The United States government will have the last say.
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Research essay sample on Labor Markets Monopoly Oligopoly And Monopolistic Competition
