4/5/2023 0 Comments Monopoly economics definition![]() Such a barrier is generally measurable by the extent to which established sellers can persistently elevate their selling prices above minimal average costs without attracting new sellers. The barriers to entry consist of the advantages that sellers already established in an industry have over the potential entrant. Industries vary with respect to the ease with which new sellers can enter them. Market Volatility: Identifying and Quantifying Investment Risks Ease of entry The degree of product differentiation as registered in the strength of buyer preferences ranges from slight to fairly large, tending to be greatest among infrequently purchased consumer goods and “prestige goods,” particularly those purchased as gifts. Notably, the criterion is a subjective one the buyers’ preferences may have little to do with tangible differences in the products but are related to advertising, brand names, and distinctive designs. ![]() In others the products are differentiated in some way so that various buyers prefer various products. ![]() In some industries the products are regarded as identical by their buyers-as, for example, basic farm crops. The structure of a market is also affected by the extent to which those who buy from it prefer some products to others. When a single seller supplies the entire output of an industry, and thus can determine his selling price and output without concern for the reactions of rival sellers, a single-firm monopoly exists. In a broader sense, oligopoly exists in any industry in which at least some sellers have large shares of the market, even though there may be an additional number of small sellers. A more common situation is that of oligopoly, in which the number of sellers is so few that the market share of each is large enough for even a modest change in price or output by one seller to have a perceptible effect on the market shares or incomes of rival sellers and to cause them to react to the change. When the number of sellers is quite large, and each seller’s share of the market is so small that in practice he cannot, by changing his selling price or output, perceptibly influence the market share or income of any competing seller, economists speak of atomistic competition. Seller concentration refers to the number of sellers in an industry together with their comparative shares of industry sales. Aspects of market structure that underlie the competitive landscape are: (1) the degree of concentration of sellers in an industry, (2) the degree of product differentiation, and (3) the ease or difficulty with which new sellers can enter the industry. Different industries have different market structures-that is, different market characteristics that determine the relations of sellers to one another, of sellers to buyers, and so forth. Types of market structuresĬompetition is directly influenced by the means through which companies produce and distribute their products. It is generally assumed that a monopolist will choose a price that maximizes profits. In this situation the supplier is able to determine the price of the product without fear of competition from other sources or through substitute products. A monopoly implies an exclusive possession of a market by a supplier of a product or a service for which there is no substitute. In economics, monopoly and competition signify certain complex relations among firms in an industry. Monopoly and competition, basic factors in the structure of economic markets. ![]()
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