Assumptions of Monopoly Market Essay

The monopoly describes an industry by comprising a single planetary house. In other words, the firm and the industry be one and the same. In the absence of regulation, monopolists whoremonger behave control over the prices they charge for harvest-homes and services. Of course, in reality, it is often difficult to set industries (whether in terms of product earnd or area covered), which often causes problems in defining monopolies.The trio main assumptions of monopoly are Single firmIn a monopoly, there is a single firm which produces all the fruit of the industry. In other words, the firm and the industry are synonymous. Consequently, the have switch off the monopolist faces is in fact the same as the industry demand curve. Unique productUnlike perfect competition (where all firms produce identical products), the monopolist produces the only product. In other words, there are no close substitutes being produced by other firms. This means that consumers can only buy output from one firm. For example, traditionally in the UK forward the deregulation of the 1980s and 1990s, customers could only buy gas (British Gas), telephony (British Telecommunications) and postal services (Post Office) from a single supplier. Barriers to unveilingOne of the main reasons wherefore monopolies mount and are sustained, is that barriers to competition exist more specifically, barriers to entry and exit. Barriers to entry can be defined generally as anything that places a electric potential entrant at a competitive disadvantage relative to firms already established in the industry. Entry barriers can arise in three ways, namely government regulations (legal barriers), the technical conditions prevailing in the industry (structural barriers) and by the actions of established firms ( strategical barriers). Legal barriers come in the form of various acts and regulations. They can arise because of various forms of regulation,which affect either industry structure (the subroutine of firms in an industry) or how firms behave.Examples of legal barriers include registration, certification and licensing of businesses, patents, taxes, tariffs and quotas. Structural barriers arise from the inherent structural and technical characteristics of an industry. In other words, the extent of product differentiation, the size distribution of firms, the availability to firms of economies of scale and scope all go down the extent and nature of barriers to entry in any given industry. Finally, strategic barriers are erected by established firms to deter the entry of new firms. much(prenominal) barriers include various forms of pricing and non-pricing strategies.Overall, in the case of a unmixed monopoly, the monopolist is effectively insulated from competition, by barriers to entry. Given that the monopolist faces a downwards sloping demand curve and produces a unique product or service, it consequently has complete control over the prices it charges.Referenceh ttp//classof1.com/homework-help/economics-homework-help/