The necessary conditions for a monopoly position in the market to be established PDF

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the necessary conditions for a monopoly position in the market to be established...

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The necessary conditions for a monopoly position in the market to be established is that monopoly is a market structure in which there is only one producer/seller for a product and there are no close substitutes for the commodity it produces and there are barriers/ market blockage to entry for firms to enter the market and compete with one another for the production and sales similar goods, products and services in the market. In a monopoly position, each firm makes independent decisions about price and output, based on its product, its market, and its costs of production. Monopolies can maintain super-normal profits in the long run. As with all firms, profits are maximised when MC = MR. In general, the level of profit depends upon the degree of competition in the market, which for a pure monopoly is zero. At profit maximisation, MC = MR, and output is Q and price P. With no close substitutes, the monopolist can derive super-normal profits.

Monopoly position is to restrict output in the market, charging a higher price than in a more competitive market, reducing consumer surplus and economic welfare. Restricting choice for consumers and reducing consumer sovereignty in the market.

Lastly, the necessary conditions for a monopoly position in the market to be established is that monopoly is a price-setter or price maker its determined the price of its goods at high cost and the only and single firm dominating its products and sales in the market and putting barrier thereby making it very difficult for other firms to enter in the market space because monopolistic market benefits from economies of scale which may be natural monopolies, so it may be argued that it is best for them to remain monopolies to avoid the wasteful duplication of infrastructure that would happen if new firms were encouraged to build their own infrastructure.

Source of research: Rittenberg, L. & Tregarthen, T. (2009). Principles of Economics. Flat World Knowledge. Each chapter of this textbook, as required reading, is available for download using the links below, and also in the weekly Learning Guides under the Reading Assignment areas.

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