The Pro’S and Con’S of Two Opposing Markets

Monopolies cannot exist in a perfect market as they do not allow anyone to join the market. A company or group having exclusive control over a commodity or service. Since the firms tend to have complete control over the market they have do not have to compete with other companies to dominate the market meaning that the product may not develop as fast as it would in another market. Also it means there is no incentive to produce goods and services that are most valued by the consumer over all other companies. The fact that there is only one producer in the monopoly means that there is no competition for products which means they are unable to switch to an alternative and this then means that resources that the company use are not beinmg allocated to the products that the consumer wants this means that there is allocative ineffiency. This then means that the market has failed. The difference is in a highly competitive market suppliers have to create a product that the consumer would rather buy over another product in order to be a profitable company and survive. However in a monopoly the goods and services provided by the supplier are pre determined by the supplier rather than the consumers demand and needs. Therefore in a monopoly market the consumer can only consume the product but they cannot define what happens to the market.
Another disadvantage of a monopoly market is that firms are not restricted to a certain price to retail the product   at and therefore do not have to produce goods or services at minimum cost. Monoplies can restrict their supply and this in turn raises the price as the Figure i shows below. This is only as long as the demand remains the same for the monopoly.

Figure i
Ina competitive market a business is constantly in competition to keep control of costs to have the lowest retail price for their product or service otherwise the company would risk losing their share in the m arket. There is no incentive to cuts costs as there is no...