For the Pure Monopoly Market Structure 1 a. List and explain the characteristics
ID: 1210011 • Letter: F
Question
For the Pure Monopoly Market Structure 1
a. List and explain the characteristics of pure monopoly and how they from the
characteristics of the pure competition market structure.
i. Please include all 6
b. List and explain how a monopolist would use each of the barriers to entry and
include how using that barrier would actually accomplish the monopolists’
objective. Be specific.
i. Please include all 6
c. You are a business manager and you are considering lowering the price of your
product. How will knowing where your firm is currently operating on its demand
curve help you make a sound business decision?
Explanation / Answer
a. A monopoly is the characteristic of a firm which dominates the industry with its products. With the absence of alternate competitors in the market they will be called as an Monopolist firm.
The characteristics of pure monopoly are as follows:
The characteristics of pure competition market structure are as follows:
These are the key characteristic difference of the Monopolistic and the competitive market structure.
b. The various barriers to entry for a monopolistic industry are as follows:
These barriers would accomplish the objectives of the monopolistic firm because the Government will not be able to handle more of monopolistic firms in a market and certiain industries are deemed to be monopolistic. For example the mining industry is a monopol market where the Government does not allow any private firms to enter. Steel industry and rubber industry are all examples of monopoly. If the barriers to this market are let loose then there will be more companies in these industries leading to a market failure. The various trarrifs and quotas constitute the legal barriers to entry in a monopolist market and these are introduced in order to restrict the imports and exports pertaining to the respective product. Hence the barriers to entry in a monopolist market very much accomplish the monopolists objective.
c. Being a business manager it will by my responsibility to study the demand of my firm's product in the market. If the demand for the product has been constant inspite of the change in price, then the firm is said to operate in a monopolistic market. On the other hand when the demand increases with an increase in price of the product then the firm is said to operate in a competitive market. Hence as a manager I will have to determine the current demand of the product along with the competition for the respective product and then finally settle on a sound pricing decision.