Perfect Competition And Its Characteristics Economics Essay

Firstly, below there I will discuss about the chapter of monopoly, its definition, characteristics and its diagram. Monopoly have separated to four terms it is included one seller and large number of buyers, no close substitute, restriction of entry of new firms and the last is advertising. Monopoly has differentiated into two types of monopoly; it is included of natural monopoly and government-created monopoly. Natural monopoly means that one firm can provide the lowest cost compared to the other two or more firms that could not provide. Government create monopolies is to avoid firms that they want to entrance into a market. In my conclusion, it can let me deeply understanding and learning about what is monopoly. Monopolist is the price marker it is the only seller or producer in the market so that it has the own right and power to contain the price.

I will be discussing perfect competition, monopolist competition, oligopoly and the last of monopoly and those of it characteristics in the market. What are the standard to be in those of the perfect and monopolist competition even through oligopoly and monopoly in the market? In my conclusion, I can deeply understand and learned about the fourth of containing perfect competition, monopolist competition, oligopoly and monopoly. Above on, those of the classes also have their own characteristics in the market.

Content Page

1.0 Introduction Question 1

1.1 Answer Question 1

1.2 Monopoly and its characteristics

1.3 One seller and large number of buyers

1.4 No close substitution

1.5 Restriction of entry of new firms

1.6 Monopoly Diagram

1.7 Conclusion Question 1

2.0 Introduction Question 2

2.1 Answer Question 2

2.2 Perfect Competition and its characteristics

2.3 Large number of buyers and sellers

2.4 Homogenous or standardized product

2.5 Free of entry and exit

2.6 Role of non-price competition

2.7 Perfect knowledge of the market

2.8 Absence of transport cost

2.9 Monopolist Competition and its characteristics

2.10 Large number of seller and buyers

2.11 Product differentiation

2.12 Easy entry and exit

2.13 Non-price competition

2.14 Selling cost

2.15 Oligopoly and its characteristics

2.16 Few numbers of firms

2.17 Homogenous or differentiated product

2.18 Barriers to entry

2.19 Monopoly and its characteristics

2.20 One seller and large number of buyers

2.21 No close substitute

2.22 Restriction of entry of new firms

2.23 Conclusion Question 2

3.0 References

4.0 Appendices

1.0 Introduction Question 1

Firstly, below there I will discuss about the chapter of monopoly, its definition, characteristics and its diagram. Monopoly have separated to four terms it is included one seller and large number of buyers, no close substitute, restriction of entry of new firms and the last is advertising. Finally, Monopoly has differentiated into two types of monopoly; it is included of natural monopoly and government-created monopoly.

Answer Question 1

Monopoly and its characteristics

Monopoly is refers to a small firm or is the only producer and seller of a good that has no close substitute. Below here we will start to discuss about the monopoly characteristics.

1.3 One seller and large number of buyers

Monopoly appearance or survive in the market when there is only seller of a product. Monopoly industry only firm in the business line to selling a product which has no similar substitute. So normally there is no discrepancy between a firm and an industry in monopoly because there is only one seller in the market.

1.4 No close substitute

Monopoly industry would sell a goods or product which has no similar substitute. It means that consumers or buyers could not find any similar substitute for the product in the market.

1.5 Restriction of entry of new firms

In a monopoly market, there are rigorous obstacles to the entrance of a new industry or a firm. Obstacles have entrance are physical and legal restraints that stint the entrance of new firms into the industry. A monopolist confronts no emulation because of obstacles of entrance.

1.6 Monopoly Diagram

F:Sem3Micro assignmentmonopolyprofits1.gif

Above on is the diagram of monopoly and I will explain about it below here. The profit maximizing output may be sold at Price P1 above the average cost AC at output Q1. The industry is producing unusual “monopoly” profits display by the yellow shaded area. The area of below ATC1 that displays the total cost of producing output Qm. Total cost amounts average overall cost multiplied by the output.

1.7 Conclusion Question 1

In my conclusion, it can let me deeply understanding and learning about what is monopoly. Monopoly in the market that is the only seller and has large number of buyers and selling the products that has no similar substitute and have a higher entrance and exit obstacle. Monopolist is the price marker it is the only seller or producer in the market so that it has the own right and power to contain the price.

2.0 Introduction Question 2

I will be discussing perfect competition, monopolist competition, oligopoly and the last of monopoly and those of it characteristics in the market. What are the standard to be in those of the perfect and monopolist competition even through oligopoly and monopoly in the market? I will also discussing those of its characteristics function and effect in the market.

2.1 Answer Question 2

2.2 Perfect Competition and its characteristics

Perfect competition is referring to the market in which there are many buyers and sellers, the products are homogeneous and the sellers may readily join and leave from the market.

2.3 Large number of buyers and sellers

The amount of a single seller sells in a market is so tiny emulated to the integrated industry. For examples, in an agricultural industry, there are thousands of duck producers in Thailand. Each industry producers have exclusive that containing a tiny of fraction of the overall agricultural firm. Even the industry increases its production; it also does not influence much on the entire firm, so that no one industry or seller can affect the price of the product in the market.

2.4 Homogenous or standardized product

The consumers do not distinguish the products of one seller to another seller. For examples, the consumers cannot distinguish the duck sold in the industry A and industry B, so the industry cannot change distinct prices for the equally product in the market.

2.5 Free of entry and exit

There is no restraint on enter into a new firms to the industry or leave the firms form the industry. For example, every industry who expect to open up a boutique can manipulate the business if he/ she has the essential elements of the production as the currently industry. Even if any industry worries about deficits it can exit the firm without any rules or restraints.

2.6 Role of non-price competition

Selling cost are the expenses for expend to raise the sale of a product or raise the requirement for that product. For examples, we will not see any commercial in the mass media that broadcast about duck or floras specifically without any brand.

2.7 Perfect knowledge of the market

Sellers and buyers also need to know the price of charged by others sellers in the market. For example, Phil has all of the information needed to grow Aloe vela. This is the similar information possessed by Becky, Dan, Alicia, and the other great number of aloe vela producers. Phil also knows that the going price of aloe vela is 50 cents. All of the aloe vela buyers know that the going price is fifty cents.

2.8 Absence of transport cost

In perfect competition it is supposed that many companies task so occlude to each other that there are no any transport costs.

2.9 Monopolist Competition and its characteristics

Monopolist competition is a market construction in which there are major numbers of small sellers betray distinguish products but there are occlude substitute products and it is liable join and leave from the market. Below here I would like to share about monopolist competition characteristics, and its have separate to five terms of specific.

2.10 Large number of seller and buyers

In the monopolist competition market there are the major number of industries are retaining. For examples, by the shampoo firms, the prices for a 500ml shampoo scope among brands have included Sunsilk, Pantene, Loreal Professionals and other well industries.

2.11 Product differentiation

Product differentiation it means the products of the firm is selling or producing that are deeply not similar. For example, if the foods are sold in open skin, then the fruits are in perfect competition market. But if the same fruits are packaged in a box and labeled as ‘Health fruits’, then this product is in monopolistic competition.

2.12 Easy entry and exit

Any new industry that would join in an industry must find certain discrimination with the existing brands. For example, if ‘Sunsilk shampoo’ wants to join into the shampoo firm, this industry must find certain distinct in terminology of diathesis, smell, model or labeling in order to be monopolistic competition.

2.13 Non-price competition

Classes of non-price competition fulfills in monopolist competition market are included commercials, promotion, rebates, free gifts, after sales services and many others. For example, the opponent industries contend with each other through commercial by which they alter the buyer’s wants for their products and fascinate more buyers.

2.14 Selling cost

Selling cost can be referring to expenses produce to fascinate buyers towards a special brand. For example, by these ways, the industry attempts to make a beneficial divert in requirement for the product and attempts to capture the market.

2.15 Oligopoly and its characteristics

Oligopoly is a market construction in which there are exclusive a few industries selling either demarcated or distinguished products and it limits the entrance into the exit from the market. Oligopoly has a few of the characteristics and it will be discussed below the following.

2.16 Few numbers of firms

Inside oligopoly the number of industries is small but size of the industries is large. For example, is premeditating oligopolistic if the top five industries produce half the firm’s overall yield.

2.17 Homogenous or differentiated product

A product sold below oligopoly can be probably a homogeneous or a distinct product. For example, computer or household products implements produced by one firm are similar to another firm. Same as the petroleum sold by Malaysia is unanimous to the petroleum by Middle East countries like Iran, Saudi Arabia and Kuwait.

2.18 Barriers to entry

These unusual characteristics also provide assists in distinguishing an oligopolistic market from a monopolistic market, if a new industry be able to join in a monopolistic market and decrease advantage of the large industry. For examples, as a new industry attempt the imaginary telecommunications market deliberated earlier it will have to contend against already subsisting brand names, install a creating unit without certain initial sales or revenue from the business and it will need to come over with innovative production skills to support it in the long run.

2.19 Monopoly and its characteristics

Monopoly is refers to a small firm or is the only producer and seller of a good that has no close substitute.

2.20 One seller and large number of buyers

Monopoly industry only firm in the business line to selling a product which has no similar substitute. So normally there is no discrepancy between a firm and an industry in monopoly because there is only one seller in the market. Monopolist is a price marker means that there is only a seller and producer and it has the own right and powerful to control over the price in the market.

2.21 No close substitute

It means that consumers or buyers could not find any similar substitute for the product in the market. For examples, Indah water it is the only seller of provided consumers or buyers for their water resources in the daily life and it is no similar substitute in the market.

2.22 Restriction of entry of new firms

In a monopoly market, there are rigorous obstacles to the entrance of a new industry or a firm. Obstacles have entrance are physical and legal restraints that stint the entrance of new firms into the industry. A monopolist confronts no emulation because of obstacles of entrance.

Perfect competition and monopolist competition are distinct to each other in that they depict deeply distinct markets scripts that relate distinct in prices, standard of emulation, number of market players, and classes of products sold. The definition of monopoly is one firm in the marketplace selling a special product. An oligopoly is a small body of an industry includes the market for a unusual product. In the fact, there can be several, or especially many smaller contestants to a monopoly or an oligopoly, but monopolist or oligopoly also contains the extensive share of the market. For example, criterion oil duplicity drove new participants out of the market before its break up.

2.23 Conclusion Question 2

In my conclusion, I can deeply understand and learned about the fourth of containing perfect competition, monopolist competition, oligopoly and monopoly. Above on, those of the classes also have their own characteristics in the market.