Monopolies, Oligopolies and the Economy
Monopolies, Oligopolies and the Economy
Monopoly is a term to describe an industry where a seller of a product or service does not have a competitor offering a close substitute. The word is derived from the Greek words monos (meaning one) and polein (meaning to sell). Rarely does a pure monopoly exist. In a pure monopoly there is only one company making and selling the item in question; however there can also be the situation where there is one company who has the bulk of sales and the other firms in the same market have little or no impact on the overriding company. Due to lack of competitors, the monopoly company has control of the supply and price of the good or service, unless there is government intervention. The monopoly will continue to make more goods as long as their marginal cost is equal to their marginal revenue. The monopoly will stop selling goods at the point when the next item sold lowers their marginal revenue on the previous goods sold. Because there is no competition the monopoly company has more control in making a profit. In normal business situations this would cause other companies to form and try to get into the same industry hoping to make a profit as well. As of July 29, 2008 two companies merged creating a monopoly in satellite radio. SIRIUS, which delivers more than 130 channels of 100% commercial free entertainment from news, sports, talk, traffic, and XM, the number one satellite radio company, combined to consume over 18 million subscribers and have cornered the market. Jointly, they have partnerships with the automobile market with General Motors, Honda, Nissan, Ford, and covering several hundred models of cars. This monopoly provides consumers with greater programming and content consumer choice, including offering consumers more for their dollar. The new merger enables the combined companies to develop accelerated technological innovation and benefit retailers like Best Buy, Radio Shack, and Circuit City. It also
Monopoly is a term to describe an industry where a seller of a product or service does not have a competitor offering a close substitute. The word is derived from the Greek words monos (meaning one) and polein (meaning to sell). Rarely does a pure monopoly exist. In a pure monopoly there is only one company making and selling the item in question; however there can also be the situation where there is one company who has the bulk of sales and the other firms in the same market have little or no impact on the overriding company. Due to lack of competitors, the monopoly company has control of the supply and price of the good or service, unless there is government intervention. The monopoly will continue to make more goods as long as their marginal cost is equal to their marginal revenue. The monopoly will stop selling goods at the point when the next item sold lowers their marginal revenue on the previous goods sold. Because there is no competition the monopoly company has more control in making a profit. In normal business situations this would cause other companies to form and try to get into the same industry hoping to make a profit as well. As of July 29, 2008 two companies merged creating a monopoly in satellite radio. SIRIUS, which delivers more than 130 channels of 100% commercial free entertainment from news, sports, talk, traffic, and XM, the number one satellite radio company, combined to consume over 18 million subscribers and have cornered the market. Jointly, they have partnerships with the automobile market with General Motors, Honda, Nissan, Ford, and covering several hundred models of cars. This monopoly provides consumers with greater programming and content consumer choice, including offering consumers more for their dollar. The new merger enables the combined companies to develop accelerated technological innovation and benefit retailers like Best Buy, Radio Shack, and Circuit City. It also
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