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A monopoly is a price maker, not a price taker, meaning that a monopoly has the power to set the market price. [ 14 ] The firm in monopoly is the market as it sets its price based on their circumstances of what best suits them.
For example, a company could cut prices and increase sales without fear that its actions will prompt retaliatory responses from competitors. The number of companies that an MC market structure will support at market equilibrium depends on factors such as fixed costs, economies of scale , and the degree of product differentiation.
If a PC company attempted to increase prices above the market level all its customers would abandon the company and purchase at the market price from other companies. A monopoly has considerable although not unlimited market power. A monopoly has the power to set prices or quantities although not both. [37] A monopoly is a price maker. [38]
Monopoly: The number of enterprises is only one, access is restricted or completely blocked, and the products produced and sold are unique and cannot be replaced by other products. The company has strong control and influence over the price of the entire market. Different market structures will also lead to different levels of social welfare.
Control of resources – If a single firm has control of a resource essential for a certain industry, then other firms may be unable to compete in the industry. Inelastic demand – One strategy to penetrate a market is to sell at a lower price than the incumbents. This, however, is ineffective with price-insensitive consumers.
Monopoly companies use high barriers to entry to prevent and discourage other firms from entering the market to ensure they continue to be the single supplier within the market. A natural monopoly is a type of monopoly that exists due to the high start-up costs or powerful economies of scale of conducting a business in a specific industry. [11]
A coercive monopoly is not merely a sole supplier of a particular kind of good or service (a monopoly), but it is a monopoly where there is no opportunity to compete with it through means such as price competition, technological or product innovation, or marketing; entry into the field is closed. As a coercive monopoly is securely shielded from ...
Control theory diagram [1] Control theory in sociology is the idea that two control systems—inner controls and outer controls—work against our tendencies to deviate. Control theory can either be classified as centralized or decentralized. Decentralized control is considered market control. Centralized control is considered bureaucratic control.