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Table of Contents
Introduction Conclusion: Monopolies and Telephone Service Providers Works Cited


Introduction



A monopoly is a "type of market that is primarily characterized by a large number of firms and products that are not perfect substitutes for one another but are highly differentiated; this type of market is also characterized by sellers and suppliers who can set prices of goods and services as they see fit" (Hirshleifer et al 238). There is no restriction on market access or exit. There is an excessive dependence on non-price actions to differentiate items. Monopolistic competition is a prevalent market structure. This type of market is home to the majority of existing (retail) businesses.



In a monopolistic system, there are several firms, which suggests that there are few firms on the monopolistic market as a whole. Their products are extremely distinct, and therefore lack the ability to affect one another's pricing. One or more enterprises can alter their prices, but the remaining firms cannot respond. This distinguishes monopolistic markets from oligopolistic markets (Hirshleifer et al 238).



In a monopolistic market, the available products may be comparable and, in most cases, able to perform the same functions; however, the manner in which they are differentiated will determine the customer's preference of the products, and the companies may produce exclusively unique products and/or services. In the process of differentiating the items, the makers add elements that distinguish them in the marketplace.



The demand curve for monopolistic items is downward sloping because consumer choices are determined by product characteristics. The equilibrium point in the long run for a firm operating in a monopolistic market is obtained by locating the tangent of the demand curve to the average total cost curve. As with any other market, incentives will cause more firms to enter while disincentives will cause some firms to leave (Brakman and Heijdra 145).



Monopolies and Telephone Companies



The phone companies are said to have a degree of monopoly. In a nutshell, all mobile phone service providers provide items that cannot be considered ideal substitutes for one another. They can all accomplish nearly identical functions. Added physical characteristics distinguish mobile phones, iPhones, and iPods from one another visually. The many features allow them to accomplish additional tasks.



Customers determine their selections and preferences based on these additional qualities. The development of monopolies in the phone industry is due to the rapid pace of technological progress; nevertheless, this comes at a hefty cost that industry participants wish to recoup as quickly as possible (Stager 471). Due of its innovative prowess, for instance, the Apple Corporation has been deemed monopolistic. Its high-performance and high-quality products, such as iPods, iPhones, and the App Store, set Apple apart from competing competitors on the market.



Apple's smartphones can execute more functions than the vast majority of phones manufactured by other businesses. Apple's ability to maintain a competitive advantage over other mobile and phone service providers enables the company to set its own prices for its goods. Numerous businesses in various regions have already complained that Apple's business practices inhibit innovation. Despite this, the company's actions are consistent with the microeconomic assumptions of a monopolistic market in which competitors cannot affect the pricing systems of other competitors.



Approximately twenty years ago, phone service providers built phones for ordinary use. Customers profited because phone makers' service providers and distributors fought for their business. In recent years, phone carriers have supplied the market with phones that are exclusively compatible with their network. This circumstance has given phone makers the ability to set their own prices for their goods.



Companies can price their items according to their desired profit margin. Due to this, phone service companies have been able to generate abnormally high profits. In situations where phone carriers attempt to establish monopolies, retail costs are always high. Occasionally, the phone service providers enter into roaming agreements so that their networks can reach one another for a fee or for free. In actuality, anytime these corporations disagree, they prevent the other company's network from accessing their own, or they decide to increase the charge for using their network.



Consequently, the consumer is either forced to pay more or is unable to access the other networks. It is typically difficult for mobile phone carriers to hold a monopoly. This is because these companies produce comparable goods. However, the only way they can establish a monopoly is by enhancing the features that distinguish their phone devices from those of other businesses. Apple, for instance, has introduced items such as iPods and iPhones that are virtually unparalleled on the market. The enhancement of a phone's functions is always accomplished through technological advancements.



One of the distinguishing characteristics of monopolies is that product prices are relatively stable. This is due to the inability of other industry participants to influence pricing adjustments. This becomes much more challenging when the offered products have no perfect equivalent. Apple Company product costs may vary by area but remain generally stable over time when compared to the European and American mobile phone markets (Froeb and McCann 172).



Companies always patent their discoveries to ensure that they enjoy monopoly status. This offers them monopoly benefits for some period (Stager, 469). This is one of the tactics employed by Apple. The corporation patents every innovation it develops. This assures that no other competitors are permitted to provide identical products on the market, per economic regulations.



For instance, Apple has been granted a patent for Software Performance Analysis Using Data Mining, which was published on April 29, 2010. The patents enable the corporation to price its new items in a manner that generates abnormal profits in a short period of time. Due to the expanding global black market and software piracy, the majority of phone businesses always overprice their unique products in order to recover their investment costs as quickly as possible and before counterfeits of such products reach the black market.



In the early years following the introduction of mobile phones to the global market, the majority of corporations held monopolies. The mobile phones were priced differentially, such that the price of a single type of mobile phone varied significantly across the global market. The disparity in price discrimination between rich and poor nations was stark. In most cases, the latest mobile phone technologies originated in the West and other affluent nations.



They initially entered the marketplaces of emerging nations. The products were sold at exorbitant costs to developing nations, while prices decreased on the marketplaces of rich ones. The emerging nations continue to rely heavily on the technology advancements of the wealthy nations. This arrangement affords phone firms the possibility to establish monopolies in developing nations. As a result of geographical isolation, this is what is known as a monopoly.



Occasionally, mobile phone companies offer locked phones that can only accept a SIM card from a specific carrier, and they also produce phones that are incompatible with others. For instance, there are different types of CDMA, GSM, EDGE, and TDMA telephones. GSM is the most popular form of phone in the world, and AT&T and T-Mobile favor it the most.



Approximately eighty percent of the world's population uses GSM phones. This suggests that it enjoys a partial monopoly on the global market, as it is used by the majority of the world's population; producers of such phones may set their pricing and earn predetermined profits. Typically, such phones include functionality that cannot be found on other goods of a similar nature. In other instances, a number of mobile phone manufacturers have created handsets that can accommodate dual SIM cards. In such instances, the pricing of the product is determined by the additional unique features that have been introduced. This may entail incorporating cameras, radios, memory cards, and other critical features into mobile phones so that they are capable of performing more than just communication.



The decision to produce for a specific socioeconomic class of clients is a second area in which mobile phone firms may be viewed as possessing monopoly power. There are specific demographics who choose to use more pricey phone models. Such are the famous and incredibly wealthy individuals who wish to take pride in their extremely expensive possessions. For example, the manufacturers of Goldvish "Le million" phones enjoy a certain degree of monopoly.



According to the Guinness Book of World Records, this phone is the most costly in the world. Due to high production costs, the majority of phone companies do not produce these types of phones, leaving only a handful of companies to manufacture and provide the devices to the global market. Due to their high-tech characteristics, they can enjoy a partial monopoly on the global market.



In a free market economy, where competition should be viewed as free and fair, monopolistic pricing is viewed as exploitative and is often disfavored. Numerous governments have imposed restrictions on monopoly, yet there are situations in which the government may encourage a monopoly. Most competitors, particularly European nations and the United States of America, have complained about monopolistic actions by numerous mobile phone service companies.



Apple is one of the phone service companies that has constantly been accused of illegal monopoly practices, however it has a high innovation rate. The majority of enterprises who complain about industry monopoly lack competitive advantages. With the ongoing evolution of communication technology, it is expected that the pricing of new phone goods will remain high, as inventive companies aim to recoup their invention costs and get a return on their investments.



This condition makes it difficult for smaller companies to profit from such breakthroughs, particularly when innovations are patented for limited time periods. Occasionally, mobile businesses can work together to form a monopoly. A notable example is a merger of Orange and T-Mobile, which would occupy the largest mobile market in the United Kingdom and hence enjoy a degree of monopoly. It will handle roughly 80% of all wireless connections in the United Kingdom (Zawya para1-10).



Conclusion



A monopoly is an economic scenario in which only one company supplies irreplaceable services and/or items to the market. Monopolies are characterized by unrestricted market entry and exit. Competitors are unable to easily influence the pricing decisions of monopolistic enterprises. In a monopolistic market, companies can earn inflated profits (Hirshleifer et al, 238). In a monopolistic market, there are several firms, indicating that there are few firms throughout the entire market. Their products are extremely distinct, and therefore lack the ability to affect one another's pricing.



One or more enterprises can alter their prices, but the remaining firms cannot respond. This is what distinguishes monopolistic markets from other market structures. In a monopolistic market, the available products may be similar and, in most cases, able to perform the same functions; however, the manner in which they are differentiated will determine the customer's preference of the products, and the companies may produce exclusively unique goods and/or services. In the process of differentiating the items, the makers add characteristics that distinguish them on the market. The demand elasticity of price indicates the potential proximity of close substitutes; the lower the demand price, the higher the monopolist's pricing.



The providers of telephone services are said to hold a monopoly. In other words, the majority of mobile phone service providers offer items that cannot be considered perfect substitutes for one another. They can all accomplish nearly identical functions. Added physical characteristics distinguish mobile phones, iPhones, and iPods from one another visually. The many features allow them to accomplish additional tasks.



Customers determine their selections and preferences based on these additional qualities. The development of monopolies in the phone industry is due to the rapid pace of technological progress; nevertheless, this comes at a hefty cost that industry participants wish to recoup as quickly as possible. The phone service providers constantly patent their ideas in order to maintain a monopoly. This provides them with monopoly benefits for a period. This is one of the tactics Apple Company use while developing new products. This technique grants the majority of phone service providers an exclusive period during which they can sell services relating to the advances.



In the early years following the introduction of mobile phones to the global market, the majority of corporations held monopolies. The mobile phones were priced differentially, such that the price of a single type of mobile phone varied significantly across the global market. The disparity in price discrimination between rich and poor nations was stark. The new mobile phone technologies, in most cases, originated from the Western and other developed nations.



They initially entered the marketplaces of emerging nations. The products were sold at exorbitant costs to developing nations, while prices decreased on the marketplaces of rich ones. The geographical spread of mobile phone service technologies could contribute to the formation of monopolies in certain places. Firms can establish monopolies through legal patents and exclusive production for a socioeconomic class.



Sources Cited



Brakman, Steven and Heijdra, Ben. In retrospect, the monopolistic competition revolution. 2004: Cambridge, Cambridge University Press



Luke Froeb and Brian McCann. Managerial Economics. 2009, London: Cengage Learning



Price theory and applications: Decisions, markets, and information. Hirshleifer, Jack, et al. 2005, Cambridge, Cambridge University Press



Stager, David. Canadian economic study and policy. 1979. Indiana University: Butterworths.



2009 Zawya article titled "Monopolistic prices: Collusion or incompetence" Web.

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