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Different types of monopoly economics software#

T his involves dropping price very low in a ‘demonstration’ of power and to put pressure on existing or potential rivals. I f the costs of production fall as the scale of the business increases and output is produced in greater volume, existing firms will be larger and have a cost advantage over potential entrants – this deters new entrants. Monopoly power can be maintained by barriers to entry, including: Economies of large scale production Maintaining monopoly power – barriers to entry

When firms merge to given them a dominant position in a market.

Different types of monopoly economics software#

When firms have patents or copyright giving them exclusive rights to sell a product or protect their intellectual property, such as Microsoft’s ‘Windows’ brand name and software contents are protected from unauthorised use.

When governments grant a firm monopoly status, such as t he Post Office.

When a firm has exclusive ownership or use of a scarce resource, such as British Telecom who owns the telephone cabling running into the majority of UK homes and businesses.

Monopolies are formed under certain conditions, including: See Competition Act.įor the purpose of controlling mergers, the UK regulators consider that if two firms combine to create a market share of 25% or more of a specific market, the merger may be ‘referred’ to the Competition Commission, and may be prohibited. While there only a few cases of pure monopoly, monopoly ‘power’ is much more widespread, and can exist even when there is more than one supplier – such in markets with only two firms, called a duopoly, and a few firms, an oligopoly.Īccording to the 1998 Competition Act, abuse of dominant power means that a firm can ‘behave independently of competitive pressures’.

State or Social Monopoly: When the government owns and controls the production of a good or service it is called a state or social monopoly.A pure monopoly is defined as a single supplier.

Private monopoly: When an individual or a private firm controls the production it is regarded as a private monopoly.Discriminating monopoly: In a discriminating monopoly, the firm charges different prices to different buyers in the same market or in different markets for the same product.Simple monopoly: In a simple monopoly the firm has monopoly power over a product or service, but it charges a uniform price to all the buyers.Other firms that do not have the access to such technology cannot produce the quality goods produced by big firms. Technological monopoly: Big firms enjoy technological monopoly due to their superior technology and economies of scale.The law prevents potential competitors from producing identical products. Legal monopoly: It arises due to legal protection given to the producer in the form of patents, trademarks, copyrights, etc.Natural Monopoly: The monopoly created on the basis of natural conditions like climate, rainfall, specific location, etc. Pure, perfect, or Absolute Monopoly: A pure or perfect monopoly means that the firm controls the supply of a product for which there is not even a remote (close) substitute. The following are some of the types of monopolies: In a monopoly, there is only one seller who controls the entire market supply for a product that has no close substitute. Monopoly is a type of imperfect market structure.