ECO 205 Week 3 DQ 1 - 7516

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    Monopolies and oligopolies both sell their products above marginal revenue price, which is bad for the consumer.  Monopolies and some oligopolies have control of the market and have the advantage of price setting. If oligopolies are in a cartel (planning group) they operate like a monopoly.

    The difference is that oligopolies cannot control other companies, even if they are in a cartel. A bit of competition is present in every oligopoly. The more companies there are, the higher the chance of competition.  Monopolies can achieve price maximization because of the lack of competition. Oligopolies rarely achieve price maximization because they cannot control how much each company produces.

    Monopolies and oligopolies can sometimes give consumers better products at a lower price than competitive markets. The problem comes when monopolies and oligopolies discover they can raise prices and keep customers.

    The book describes Microsoft as a monopoly because they have little if not substitutions. I agree that Microsoft can set the price of their product to maximize their profits. There is no other company that produces Windows.

    The power industry in my area is a government created monopoly. We use a company that is part of the Rural Utilities Service. This service was created to allow rural areas to receive power. I called my power company and they said President Roosevelt created this service because a lot of power companies would not sell power to rural residents. In this case, I think the government did a service to rural residents by creating districts that each company can sell to. I am not sure if it affected the price of city electricity because they cannot sell to rural customer and Rural Utilities service companies cannot sell in the city. I think the government just created two monopolies. The good thing about the rural monopoly is it is controlled by a board of directors that are elected by the customers, and who are customers. It is a member-owned company so they do not try to price maximize

 

Solution Description

    Monopolies and oligopolies both sell their products above marginal revenue price, which is bad for the consumer.  Monopolies and some oligopolies have control of the market and have the advantage of price setting. If oligopolies are in a cartel (planning group) they operate like a monopoly.

    The differe