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Naked Economics Summary Chapter 14

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The first market structure explained on the Mankiw Principles of Economics book in chapter. 14 is Competitive Market. Competitive market is a market with various consumers and vendors trading identical products so that each buyer and seller is a price taker. Competitive market sometimes is called a perfectly competitive market. This market has two characteristics: There are many buyers and many sellers in the market. Also, the goods offered by the various sellers are largely the same. (Mankiw, 2016). Consumers and vendors must accept the price the market determines in competitive market, therefore, are said to be price takers. Sometimes there is a third characteristic that makes this market structure a perfectly competitive market: Firms …show more content…

Monopoly is a firm that is a sole seller of a product without any close substitutes. Monopoly characteristics is profit maximizer, price maker, single seller, high barriers to entry, and price discrimination. The essential cause of monopoly is barriers to entry. A monopoly remains the only supplier in this market because other firms can’t enter the market and compete with it. Barriers to entry have three main sources: monopoly resources, government regulation, and the production process. Monopoly resources is a crucial supply for manufacture is owned by a single firm. Government regulation, the government gives a sole firm the exclusive right to produce some goods or services. The production process is a single firm can produce output at a lower cost than can a larger number of firms. (Mankiw,2016). More output is sold so quantity is higher, which tends to increase total revenue. The price falls, so price is lower, which tends to decrease total revenue. (Mankiw,2016). The profit maximization quantity of output is determined by the intersection of the marginal revenue curve and the marginal cost curve. There are some limited resemblances between a monopoly and competitive market: the cost functions are the same, both minimize cost and maximize profit, the shutdown decisions are the same, and both are supposed to have perfectly competitive market factors. In the 19th centuries the famous telephone company AT&T was a monopoly company. At that time, it was the only telephone company; until 1974, that the United States Department of Justice filed an antitrust lawsuit against AT&T which ended up splitting this telephone service company into six, therefore, there will more competition. Netflix is said to be a

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What is a monopoly: a monopoly is the exclusive control of a commodity or service in a particular market. For example famous monopolies include Andrew Carnegie's steel company which in the 1900s was responsible for almost all the steel production in the world and John D Rockefeller's Standard Oil company which responsible for almost all the United States production of oil. In their time these two companies were a few of the biggest ever.

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