Monopoly was first marketed on a broad scale by Parker Brothers on November 5, It remains a classic, passed down from generation to generation, making it the world's most popular game.
A Brief Introduction Monopoly is a term used by economists to refer to the situation in which there is a single seller of a product i. The word is derived from the Greek words monos meaning one and polein meaning to sell.
Governmental policy with regard to monopolies e. Two Extreme Cases It can be useful when thinking about monopoly to look at two extreme cases. One is a pure monopoly, in which one company has complete control over the supply or sales of a product for which there are no good substitutes.
The other is pure competition or perfect competition, a situation in which there are many sellers of identical, or virtually identical, products. There are various degrees of monopoly, and rarely does anything approaching pure monopoly exist.
Thus, the term is generally used in a relative sense rather than an absolute one.
For example, a company can still be considered a monopoly even if it faces competition from 1 a few relatively small scale suppliers of the same or similar product s or 2 somewhat different goods or services that can to some limited extent be substituted for the product s supplied by the monopolist.
A business that produces multiple products can be considered a monopoly even if it has a monopoly with regard to only one of the products. A company with a product that is just slightly different from other companies' products e.
However, it might have very little monopoly power within the broader product category that includes both its and its competitors' products e. In contrast, a company with exclusive rights to sell a product for which there are few if any good substitutes e. For a product characterized by perfect competition or nearly perfect competitioneach supplier or seller must set its price equal to or very close to those of its competitors.
This equilibrium price tends to be close to the cost of producing the product due to price competition among its many sellers. It is difficult for any seller to charge a higher price than its competitors because it would be easy for buyers to purchase from other sellers instead.
It is likewise difficult for a seller to charge a lower price, because profit margins i. Naturally, all businesses, regardless of their degree of monopoly power, generally want to be as successful as possible, and thus they attempt to maximize their profits.
However, it is much easier for a monopolist to make large profits through profit maximizing behavior than it is for a firm in a highly competitive industry. The reason is that the former has much greater flexibility in setting prices than does the latter, which has little if any control over prices.
The monopolist has this flexibility because there is little or no direct competition to force the price down close to the cost of production. Of course, the monopolist will be acutely aware of the fact that the higher the price it charges, the smaller will be the number of units sold what economists refer to as the law of demand 3.
This is because at higher prices some purchasers will just decide to buy fewer units or no units at all. A reduction in the number of units sold will eventually occur when the price rises to a sufficiently high level, regardless of how much buyers think they want the product, because buyers are ultimately limited by their incomes and savings.
Assuming unrealistically, but for the sake of simplification that a monopolist could only charge a single price for a product, it would find the unique price that maximizes its profits. Raising the price above that level would reduce profits because the negative effect of the reduction in the number of units sold due to the higher price would more than offset the positive effect from the higher price.
This profit maximizing price would generally be substantially higher than the product's cost of production, and it would thus also be substantially higher than the equilibrium price that would exist for the product if it were instead supplied by a number of competitive firms.
Likewise, the volume of output and sales would be substantially lower than in a competitive situation. The monopoly power of a company for a product is commonly thought of in terms of its market share for that product. However, it can also be measured by the ability that a company has to set the price for the product.
In fact, this is the measure of monopoly used by some government agencies when studying competition in various industries. Price Discrimination A seller of a product in a competitive industry i.
However, monopolists not only have the ability to charge a higher price than would competitive firms supplying the same product, but they also have the ability to charge significantly different prices to different customers for the same product.Long Run Equilibrium Under Monopoly: The monopolist creates barriers of entry for the new firms into the industry.
The entry into the industry is blocked by having control over the raw materials needed for the production of goods or he may hold full rights to the production of a certain good (patent) or the market of the good may be limited. BREAKING DOWN 'Perfect Competition' Perfect competition is a benchmark to which real-life market structures can be compared.
Perfect competition is the opposite of a monopoly, in which only a. Joan Robinson, in full Joan Violet Robinson, née Maurice (born October 31, , Camberley, Surrey, England—died August 5, , Cambridge, Cambridgeshire), British economist and academic who contributed to the development and furtherance of Keynesian economic theory..
Joan Maurice studied at the University of Cambridge, earning a degree in economics in Monopoly Classic Game It's the fast-dealing property trading game where players buy, sell, dream and scheme their way to riches.
This version of the Monopoly game welcomes the Rubber Ducky, Tyrannosaurus Rex, and Penguin into its family of tokens. Monopoly. A pure monopoly is a single supplier in a market. For the purposes of regulation, monopoly power exists when a single firm controls 25% or more of a particular market.
Formation of monopolies. Monopolies can form for a variety of reasons, including the following. The perfect competition price is OP 1, whereas monopoly price is OP. In equilibrium, monopoly sells ON output at OP price but a perfectly competitive firm sells higher output ON 1 at lower price OP 1.