Monopoly and Competition (Essay Sample)

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Monopoly and Competition
The structuring of any particular market depends on the competition characteristics within that market. Perfect competition is at one extreme and monopoly at the other. Many buyers and consumers, perfectly homogenous goods, lack of barriers to entry and exit, well-defined property rights, and perfect information flow, characterize a perfectly competitive market. The above features produce a system with no economic actor with the power to control or affect prices of goods in the market. The producers, in this case, become price takers (Chen, and Marius, 520). Producers are limited to the choice of amount to produce and not the prices of selling their outputs. In the real business situation, few industries honestly consider a perfect competition status, but others come only close.
A monopoly occurs in a situation of several consumers but one manufacturer. Monopolies are considered to exist in an absence of competition to produce the goods or services as well as nonexistence of viable alternatives for the products produced. Consequently, the lone producer possesses the price control power. The producer attains the power to control the prices of goods produced by deciding the quantity to produce and thus their price levels (McEachern, 228). Public goods-producing companies are the commonly known examples of monopolies. Considering electricity with the high initial cost of putting power lines makes it incompetent to have several providers.
Despite the above differences, monopolistic and perfect competition markets are similar in that they attain elasticity of demand in the long run. Comparing monopolies and perfect competition in regards to their benefits to consumers proves that monopolies have no good. Monopolies do not encourage competition, hence limiting the creation of new techn...