Monopoly or complete monopoly is exactly the opposite of complete competition. In a perfectly competitive market, many manufacturers produce a homogeneous product, and the products of different manufacturers can be completely replaced. The definition of monopoly is that there is only one producer of a certain product and there is no good substitute for this product. This manufacturer is called a monopolist. So the output of monopoly manufacturers is the output of the industry, and the demand curve faced by monopoly manufacturers is the demand curve of the industry.
2. Conditions for monopolizing the market
(1) Only one manufacturer produces and sells goods in the market.
(2) The goods produced and sold by this manufacturer have no similar substitutes. For example, power plants have a monopoly on lighting energy, because candles or kerosene lamps are substitutes for electric lights, but they are not similar substitutes.
(3) It is extremely difficult or impossible for any other manufacturer to enter this industry. In such a market, exclusive monopoly manufacturers control the production and market sales of the whole industry without any competitive factors, so monopoly manufacturers can control and manipulate market prices.
3. Reasons for monopoly.
(1) economies of scale (natural monopoly)
The production of some products has remarkable economies of scale, and the stage of increasing returns to scale can last until high output, so the cost of supplying the whole market by one manufacturer is much lower than that of dividing the market by several manufacturers. For example, public utilities such as power supply and running water are typical natural monopoly industries.
(2) Patents
Patents are a form of monopoly permitted by the government and laws, because patents prohibit others from producing a certain product or using a certain technology unless the patentee agrees. Patents protect inventions and innovations and encourage people to invest in R&D, because it takes a lot of time, manpower and financial resources to carry out R&D and inventions. For example, it took Microsoft Corporation of the United States four years to develop Windows 2000 computer operating system software, and the investment exceeded 654.38+0 billion dollars. However, once a new product is invented, the cost of imitation is much lower. If there is no patent system, who wants to invest in research and development of new products? However, the monopoly position brought by patents is temporary, because patents have legal restrictions. In China, the validity period of a patent is 15, and in the United States it is 17.
(3) Resource control
That is, a manufacturer controls the resources necessary to produce a certain product, so it is often called a monopolist in the product market. The most typical example is Alcoa before World War II, which controlled the mining of bauxite in the United States from the end of 19 to the 1930s, thus becoming the monopolist of the aluminum industry in the United States. South Africa's "Debir" company owns and controls four-fifths of the diamond mines on the earth, becoming a monopolist in the world diamond market. For another example, all chromium mines are concentrated in South Africa and controlled by a few producers, which also forms a natural monopoly.
(4) Franchise right
The government restricts the number of people entering a certain industry by issuing licenses, making it the sole supplier of a certain product. For example, railway transportation departments, post and telecommunications departments, etc. The output and prices of these manufacturers are usually managed and controlled by the government.
Comments on monopoly market:
First, the waste of production resources. Because compared with perfect competition, the average cost and price of complete monopoly are higher, but the output is lower. Under the condition of perfect competition, the condition of long-term equilibrium is MR=AR=AC=MC, that is, the manufacturer keeps the production equilibrium at the lowest cost, so the production resources are optimally allocated. However, in the long-term equilibrium under the condition of complete monopoly, the equilibrium output is determined by the intersection of MR curve and MC curve (including SMC and LMC). Because production is balanced when the production cost is higher than the lowest average cost, resources are not optimally allocated.
Second, the loss of social welfare. Monopoly manufacturers practice price discrimination, that is, price difference, and the high price paid by consumers means the reduction of consumer surplus. This reduction is a loss of social welfare.
Third, monopoly causes unfair social distribution. Monopoly enterprises can maintain excess profits for a long time, and this profit has nothing to do with input.
Fourth, monopoly can easily lead to corruption. Because some monopolies are related to the government, monopoly enterprises will maintain their monopoly position through rent-seeking behavior.
Fifth, monopoly hinders social progress. In most cases, monopoly will stifle competition.