Differences Between Competitive and Monopoly Markets

Table of Content

A competitive market and a monopoly market have differences that result in different implications. In a monopoly market, a single entity provides or supplies the demand for a service or commodity. On the other hand, in a competitive market, there is competition as more than one supplier competes for the demand of a commodity or service.

Because of the absence of competition in a monopoly market, consumers are forced to buy at high prices. Producers are not compelled to bring prices down because consumers have no other choice but to buy from them. On the other hand, a competitive market allows for scaling down the price of a given commodity or improving its quality as producers compete against each other. This competition ensures that consumers will buy from them.

An entity that monopolizes an industry controls the product or service within a given area, dominating the entire industry. In contrast, competitive markets provide consumers with a choice. Monopolies have been criticized for allowing profit-maximization and being harmful to consumers. There is much debate on which market is better, with some arguing that monopolies are better in certain scenarios while others argue that competitive markets are superior. However, for a monopolized industry to benefit the public, it must be controlled by legislation preventing the monopolist from charging profit-maximizing prices.

If a monopolist were to stop producing a monopolized commodity, especially if it is one that consumers cannot afford to lose, it would cause panic. A drug cartel can be classified as a monopoly since it controls all the drugs being supplied in a certain locality. This is one reason why illegal drugs are priced exorbitantly. Generally, a monopoly is deemed beneficial for the business entity but not for the consumer, while a competitive market is deemed beneficial for the consumer but not for the business entity.

References

The Linux Information Project published an article titled Monopoly: A Brief Introduction” on December 1, 2006. The article can be retrieved from http://www.linfo.org/monopoly.html and was last accessed on November 20, 2008.

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