ModuleCode : FC006
Group :D
Module Title : Economics in an International Context
Assessment Title : Essay
Assignment Title : What are the main differences between Monopolistic Competition and Monopoly market structures? To what extent do you agree with the view that Monopolies are ‘bad’ for the consumers?
Tutor Name : RecepYucedogru
Student ID : 133214
Date of Submission : 21/03/2012
Word Count : 1,000

PG 1

Outline

1. Introduction

- Definition of both monopolistic competition and monopoly.
- Examples for both definitions.

2. The main differences

- The main differences between monopolistic competition and Monopoly.

3. 2 Drawings

- First graph is for the monopolistic competition and the second graph is for the monopoly.

4. Example of two companies

- LISCO operating in the monopolistic competition.
- ESPN which operates in the monopoly.

5. Conclusion

- summary of what has been written.
- and the final answer.

6. References.

PG 2

Monopolistic competition is a type of imperfect competition that which producers sell products that are a little bit different from one another, but not perfect substitutes for example quality of the product. In this market structure, a firm takes the prices charged by its rivals as given to them and ignores the influence of its own prices on other firms.

Chamberlin (USA) and Robinson (Great Britain) once said that Monopolistic competition differs from perfect competition, because that production does not take place at the lowest possible cost. This has led to firms being left with excess production capacity.

Monopoly is the type of market structure in which there is only one buyer of a product or service, a monopoly may also have monopsony power over a sector in the market.

Monopoly is bad for the consumers because it does not give the customer the right

to choose, and without competition must pay the asking price of whatever the

organization sets. The government makes it a point to break up monopolies, to

increase competition which is better for society in general, as well as the economy.

Monopoly is the type of market structure in which there is only one producer or seller for a product, In other words, the business is the industry. Entry into such a market is restricted due to high costs or other impediments, such as economic or social

factors.

PG 3

For instance, a government can create a monopoly over an industry that wants to control, such as electricity. Another good reason for the barriers against the entry into a monopolistic industry is that most times, one entity has the exclusive rights to a natural resource. For example, in Saudi Arabia the government has sole control over the oil industry.

The main differences between Monopolistic competition and the monopoly is that in the monopoly the market situation in which there is only a single seller and large number of buyers. Whereas monopolistic competition is a market situation in which there is large number of sellers and large number of buyers.

In monopolistic competition, close substitutes are there in the sense that products are different in terms of size, color, packaging, brand, price etc. as in case of soap, toothpaste etc. but in the monopoly, there is no close substitutes of the good, if any, it will be a remote substitute.

In monopolistic competition, there is aggressive advertising but in monopoly, there is no at all or a very little.

In monopolistic competition, demand curve faced by the firm is more elastic because of availability of close substitutes. It means if a firm raises its price, it will lose its large market share as customers in large will shift to close substitutes present in the market. But in the monopoly, the demand curve faced by the firm is less elastic because of no close substitutes. It means if the firm raises its price, demand will