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In monopolistic competition, a company takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other companies. [1] [2] If this happens in the presence of a coercive government, monopolistic competition will fall into government-granted monopoly.
A state monopoly can be characterized by its commercial behavior not being effectively limited by the competitive pressures of private organisations. [1] [2] This occurs when its business activities exert an extensive influence within the market, can act autonomously of any competitors, and potential competitors are unable to successfully compete with it.
The government may also reserve the venture for itself, thus forming a government monopoly, for example with a state-owned company. [ citation needed ] Monopolies may be naturally occurring due to limited competition because the industry is resource intensive and requires substantial costs to operate (e.g., certain railroad systems).
In economics, a government-granted monopoly (also called a "de jure monopoly" or "regulated monopoly") is a form of coercive monopoly by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation, or other mechanisms of government enforcement.
The total surplus of perfect competition market is the highest. And the total surplus of imperfect competition market is lower. In the monopoly market, if the monopoly firm can adopt first-level price discrimination, the consumer surplus is zero and the monopoly firm obtains all the benefits in the market. [15]
A legal monopoly, statutory monopoly, or de jure monopoly is a monopoly that is protected by law from competition. A statutory monopoly may take the form of a government monopoly where the state owns the particular means of production or government-granted monopoly where a private interest is protected from competition such as being granted exclusive rights to offer a particular service in a ...
The emergence of oligopoly market forms is mainly attributed to the monopoly of market competition, i.e., the market monopoly acquired by enterprises through their competitive advantages, and the administrative monopoly due to government regulations, such as when the government grants monopoly power to an enterprise in the industry through laws ...
In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs , [ 1 ] limited information , and ...