Do Pure Monopolies Exist Free Essay Example

“No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist. Do you agree? ” (Brue, McConnell, Flynn, 2010). I would have to agree with this statement. I do not believe that there is such a thing as a pure monopoly. There are always alternatives or substitutes available when choosing to purchase products or services from firms.

Pure monopoly exists when “a single firm is the sole producer of a product for which there are no close substitutes” (Brue, McConnell, & Flynn, 2010).

There are less pure forms of monopoly and near-monopolies, but not totally pure monopolies. There are several main characteristics that must be present in order for a pure monopoly to exist. These are: single seller, no close substitutes, price maker, and blocked entry. A pure monopoly is an industry in which a single firm is the sole producer of a specific good or the sole supplier of a service.

Their product is unique in that there are no close substitutes, therefore, consumers who decide not to purchase the monopolized product must do without it. Many people will argue that electric companies are pure monopolies. I disagree because there are alternatives available: oil, propane, natural gas, solar, and wood are substitutes that can be used as sources of light and heat. The pure monopolist controls the total quantity supplied and as a result has considerable control over price; it is a price maker.

The pure monopolist confronts the usual downward-sloping product demand curve and can change its product price by changing the quantity of the product it produces.

A pure monopolist faces no immediate competition because certain barriers keep potential competitors from entering the industry. Those barriers may be economic (economic of scale), technological, legal (patents and licenses), or of some other type. In a pure monopoly entry is totally blocked.

All firms compete with rivals for product sales, whether they control the entire market for a product or not. The control over a market and product does not necessarily mean there is not competition. Even if one single firm were to control an entire market and their product, there is always another firm that can produce a product that holds the same qualities and is closely related to the other. The post office is usually our first choice when we want to send a letter or package, but it also has competition from FedEx, UPS, and DHL.

If there were a situation where there was a market that did not have to compete with another market over product sales, there would always be competition when it comes to the amount of money they need to bring in. Many characteristics must be present to classify firms as pure monopolies. There may be less pure forms such as: the water company, the cable TV company, and the local telephone company, and near-monopolies such as: Intel, First Data Corporation, and De Beers, however, I do not believe that pure monopoly exists.

All firms compete with rivals for product sales, whether they control the entire market for a product or not. When choosing to purchase products or services from firms there are always alternatives or substitutes available even though they may not be our first choice.

References

1. Brue, S. L. , McConnell, C. R. , & Flynn, S. (2010). Essentials of Economics (Ashford Custom 2nd ed. ). New York: McGraw-Hill/Irwin.

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