Monopolies

Market Structure is how firms are organized in the industry, basically there are 4 types of market structures. Consumers need to know the structure of any market they plan to invest in. When I say invest, whether it is working for a specific industry or buying into that particular market, you need to know what type of business you are getting into. You need to know whether the competition is fierce or if there is no competition in the market you are investing in. I will also include a chart for easy viewing for those who like visuals. The 4 types of market structures are Monopoly, Oligopoly, Pure competition and Monopolistic competition.

Monopolies are when one company, corporation or entity controls a commodity or service to the point where there is no competition; only that company or entity has exclusive rights to their commodity. Monopolies are illegal in the United States. Since 1890 the Sherman Act has been in place. Even if there is a threat of a monopoly or a potential monopoly such as Microsoft, the government will step in and intervene. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court. (www.stolaf.edu). Monopolies control their own prices for their commodity, and are not good for the economy. Monopolies also limit how the industry grows.

There are also natural monopolies, which is good for the economy because the government and firms form an alliance so everyone wins. Everyone benefits, prices are stable and fair, but it limits what consumers can choose from, example is gas and electric, utility companies.

Oligopolies are market forms in which a market or industry is dominated by a small number of...