Monopoly and Oligopoly Essay Example | Topics and Well Written Essays - 500 words

Monopoly and Oligopoly - Essay Example Another feature of oligopoly is that the actions of another firm largely affect the other firms. It means that the success of another firm depends on the action of another firm. Oligopolies would want to know what other firms have availed in the market. For example, McDonalds will keep monitoring what Wendy’s have made available in the market. Oligopolistic market also has a bit of a barrier for entry to the market but not like monopoly market structure. Conversely, monopoly is characterized by the products differentiation. This means that the firm produces a product that is unique. This means that there is no close substitute for the product. Monopoly operates as a single seller in the market; it is a firm that provides most of the supplies in the market. Bookstores in campuses are some examples of monopolies. Unlike perfect competition, the kind of market that monopoly operates is not easy to enter due to quite a number of barriers for entry such as legal barriers (Tucker, 2010). A natural monopoly is where by one firm stands out as a primary supplier despite the presence of other firms. In this industry, it is advantageous for production to be concentrated on this major firm rather than contested competitively. Natural monopolies are mostly public utilities. The legality of these natural monopolies is based on the fact that it is economically sensible to have them. That is the cost of production of goods and services, for example power, by these monopolies, are very high such that it is economically sufficient if only one company produces it. The government however regulates the operation of the two monopolies. This information shows why ‘natural’ monopolies are legal and other monopolies illegal (Hirschey, 2008). Laissez-faire is seen as an economic-policy doctrine. This doctrine opposes government interference in business other than the minimum functions of ensuring peace,