Question

Write short notes on the following:

1. Types of monopoly

2. Features of pure competition

Answer 1

1. The following are the seven types of monopolies:

i. Natural monopoly - It emerges due to the availability of natural resources at a particular location. The benefit of these natural resources is enjoyed by one particular firm or industry.
ii. Public monopoly - It is a government-created monopoly; it is created when an entity is solely owned by the government.
iii. Private monopoly - It occurs when a private firm sells a particular product in the entire market. The private firm solely owns and manages the production of goods.
iv. Legal monopoly - It refers to the monopoly created by law by granting copyrights, patents, etc.
v. Simple monopoly - In this type of monopoly, all customers are charged a single price for the same product. In other words, there is no price discrimination under this monopoly.
vi. Discriminating monopoly - It refers to a monopoly that charges different prices from its customers for the same product or service.
vii. Voluntary monopoly - It refers to the monopoly jointly created by big business firms.

2. Some of the features of pure competition are:

i. Large number of buyers and sellers: There exist large number of buyers and sellers in this kind of market.
ii. Homogeneous product: The products sold under pure competition is homogeneous which means they are same in respect of quality, colour, size etc.
iii. Free entry and exit of firms: The firms under pure competition are free to enter or exit the market. There is no legal restriction as such.
iv. Single price of the product: Under pure competition products are sold at a unified price i.e. there is no price discrimination.