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Competion and monopolies

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Competion and monopolies

  1. 1. 1.Competition 2.Monopolies 3.The differences between competition and monopolies
  2. 2. 1.Competition  1.1Definition  In a market with perfect competition, there are many companies supplying the same good or services, but none of them are able to control the price.  1.2The laws of supply and demand  In perfect competition, these laws set the price not the company
  3. 3. 1.3.Conditions  1.There must be many small companies competing . Each company has its own equal small share of the market .  2. Products & services from different companies must be the same  3. Customers and companies must have perfect and complete information.  4.There mustn’t be any barriers to the new companies entering the market.  5. Every company in the market must have the same access to the resources & teachnology they need.
  4. 4. 1.4.Benefits and drawbacks Benefits Drawbacks  1. Because there is perfect knowledge, there is no information failure and knowledge is shared evenly between all participants.  2. There are no barriers to entry, so existing firms cannot derive any monopoly power.  3. There is no need to spend money on advertising  1. profits will be lower compared in markets than monopoly power  2. No Scope for economies of scale because of the high number of firms in there
  5. 5. II.MONOPOLY  2.1.Definition: A monopoly means that one company has a much larger market share than any other company.  2.2.The laws of supply and demand: In monopoly, the normal laws of supply and demand do not always work.
  6. 6. 2.3.Types of monopoly A pure monopoly A legal monopoly A state monopoly
  7. 7. A pure monopoly  What is a pure monopoly? A pure monopoly means when there is only one company in the market providing a particular product or service.  When does it occur? It happens when a company creates an economy of scale. An economy of scale is when variable costs of production increase more slowly than increases in supply.
  8. 8. A legal monopoly  What is a legal monopoly? A legal monopoly means that it is created by law.  When does it occur? It occurs when the government makes it happen. The government may decide that a competitive market is not good for a certain industry and it can make one company be the only legal supplier.
  9. 9. A state monopoly  What is a state monopoly? A state monopoly means that it provides the service itself.  The postal service is a typical example for this one.
  10. 10. 2.4The way to creat a monopoly -The world of business is a jungle ,and there are more aggressive way to creat a monopoly .One of these is by making takeovers
  11. 11. TAKEOVERS • This means that a more powerful company buys a smaller one in the same industry . • Takeovers happen vertically or horizontally .
  12. 12. Vertically takeovers • In a vertically takeovers ,a company buys companies that supply it with materials or services . • For example A publishing company might buy a printing business.
  13. 13. Horizontal takeovers • In a horizontal takeovers ,a company buys its competitor ,the competitor become part of the first company.
  14. 14. 2.5 +Benefits of monopoly. +Drawbacks of Monopoly.
  15. 15. Drawbacks of Monopolies. • Monopolies are not good for consumer .This is because in a monopoly ,the laws of supply and demand do not work in the same way. • A company with a monopoly become a price maker .They have much more power to set the price for their product or service .Also ,they don’t usually spend money on innovation because they don’t need to. Monopolies mean less choice fore consumers.
  16. 16. 3.The differences between competition and monopolies Competion Monopolies Definition In a market with perfect competition, there are many companies supplying the same good or services, but none of them are able to control the price A monopoly means that one company has a much larger market share than any other company. The laws of supply and demand In perfect competition, these laws set the price not the company In monopoly, the normal laws of supply and demand do not always work. How to create 5 conditions 2 ways: vertical takeovers or horizontally takeovers

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