Monopoly is a market framework where there is only one firm in the industry. In fact, there a wide range of factors leading to an incident of monopoly, such as obstacles to accessibility. However, obstacles must be high enough to block the accessibility of new companies under the problem of monopoly.
I would like to get started on with economies of scale. Economies of size take place when increasing the scale of production contributes to less long-run cost per device of output. The industry may well not be able to support several producer in case a monopoly experiences considerable economies of scale. This is known as natural monopoly. It is especially likely if the marketplace is small. For example, two airport linking services, Heathrow Express and Heathrow Connect, might find it unprofitable to provide the same routes, each running with perhaps only half-full trains, whereas one company with a monopoly of the routes will make a profit. Even when a market could support more than one firm, a fresh entrant is unlikely to be able to start through to an extremely large size. Thus a monopolist already experiencing economies of level can charge a price below the cost of the new entrant and drive it from the business. If, however, the new entrant is a company already established in another industry, it might be able to survive this competition.
Moreover, I would like to discuss legal security. The firm's monopoly position may be guarded by patents on essential functions, by copyright, by various kinds of licensing and by tariffs and other trade restrictions to keep out international competitors. Examples of monopolies covered by patents include most new medicines produced by pharmaceutical companies, Microsoft's Home windows os's, and agro-chemical companies, such as Monsanto, with various genetically improved plant kinds and pesticides.
Lastly, lower costs for an established company. An established monopoly will probably have developed specialised creation and marketing skills. It is more likely to be aware of the most efficient techniques and the most dependable and/or cheapest suppliers. Chances are to have access to cheaper finance. It is thus working on a lesser cost curve. New firms would therefore find it hard to contend and would be likely to lose any price conflict.
Question 2
The zippers market matches the monopoly model. YKK is the globe largest zipper manufacturer. It produces more than 50% of the zippers in the industry, which dominates the zippers industry. YKK makes around half the world's zip fasteners by value. However it also produces other fastening products, architectural products, and professional machinery. Even as can see in our lifestyle, simple logo consisting of the characters "YKK" adorn many of the zippers on the merchandise we own and use day-to-day. YKK is a global company manufacturing global product. There is no doubt that we own many items inside our life with the YKK zippers like handbags, hoodies, jeans, trousers, totes and coats, etc. YKK is a market head in fastener sales and circulation; it is hard to think that their domination in the style and clothing industry will diminish any time soon.
However, fastening products are the main product of YKK. There will vary types of products in YKK, and it is distinguished as the Glide Fastener Department, the Textile and Clear plastic Products Section, the Snap Fastener and the Button Division. There are different types of zippers as well, such as metallic zippers which is extra durable for jeans, steel zippers which is refined for visual appeal and corrosion amount of resistance, metal zippers which is polished and plated for overall look with different colorings, the vinyl coil zipper without visible pearly whites and the tough plastic zipper. There are also some hook and loop products, plastic clips and buckles and snaps and buttons including snap fasteners and jeans switches.
With each one of these products, it can show that YKK owns a wide range of products in order to keep its dominance in the zipper industry.
Question 3(a)
Natural monopoly is a situation where long-run average costs would be lower if an industry were under monopoly than if it were distributed between several competitors. A natural monopoly is accessible when economies of scale are so substantive that a single firm can produce total business output at a lower unit cost, and so better than two or more firms. In effect, the long-run average costs are dropping over such a wide range of production rates relative to demand that only one firm can survive in such an industry. A more specific criterion is the subadditivity of the price function.
It is made by the natural need of industrial development. Generally, economies of level will lead to natural monopoly, for example, some general public constructions supplying water, gas requires a huge amount of investment, the influenced area is usually broad but the earnings is not excessively high. The typically quoted types of natural monopoly are utilities and transport. For instance, a multi-wrap running water pipeline or energy telecommunication line to be set up in a single area is obviously wastage. Additionally it is a natural monopoly in this case. Besides, whenever a laundry can satisfy the demand in just a little village, additionally it is called natural monopoly. Also, for a few high technology product, as it acquires specialized research and development potential, only one or few factories may be able to produce the merchandise in a certain time, this might lead to natural monopoly as well.
Question 3(b)
The reasons why an all natural monopoly should be regulated are as follows:
First of all, unregulated competition usually produces poor results corresponding to many financial arguments. They produce unsatisfactory services with high prices, and industry instability. The quarrels are usually about proper invention, the quality of service and the purchase price.
The investment of a firm may be appropriated if they're not protected, seemingly by the federal government regulation whenever a federal is using the correct invention argument. For the quality of service, it suggests an industry may have problems with the competition between companies as they could have difficulty between prices rather than quality of services. However, this does not mean that the federal government franchise and polices will be the only ways to work put the problems. There are more efficient ways to safeguard the protection under the law and ownership of the companies spending or offering the assistance, such as patents, copyrights and brand names. Yet, the government might take part in enforcing the possession of patents, copyrights and brands but their involvement will be minimised.
Question 3(c)
Natural monopoly offers go up to a potential issue between cost efficiency and competition, with an elevated number of opponents resulting in some loss of scale efficiencies. It is important to notice that regulation of natural monopolies also occurs for reasons apart from market failure. Actually, many true to life restrictions have been encouraged by the concern for energetic efficiency, distributional considerations and other factors, including even 'moral' considerations-such as fairness. The most important challenge is scientific progress, which changes the price curves, hence enabling countries to re-examine the hitherto quality forms of natural monopoly rules, i. e. price and access regulation, predicated on the concept of natural monopoly.
Question 4
Competition Legislations are laws and regulations that promote or maintain market competition, spread the public resources in the best place, enable consumer to make use of the cheapest possible price to obtain the best, most recent and broadest variety of goods and services by regulating anti-competitive conduct. There are different clauses shown in the competition law of different countries such as price correcting, merger review and maltreatment of dominance.
In the situation of Sky Broadcasting, it is not allowed to acquire the Manchester United SOCCER TEAM as it may limit free trading and competition between different companies on the market. In UK, Sky Broadcasting is a pay Television channel. As a result, if Sky Broadcasting expenses the Manchester United Football Club, it can be able to intervene the process to getting the broadcasting right of the World Cup. In order to avoid this, the British isles government prevented Sky Broadcasting from purchaasing the Manchester Football Club and maybe try to secure the opportunity of getting the broadcasting right for other broadcasting companies to maintain competition.
On the other hands, the reason why Boeing was presented with permission by the government to buy McDonnell Douglas may be the following:
Economies of scale: When increasing the scale of production brings about a lesser long-run cost per device of output. Because of this, merging of the two companies may very well be benefited from the economies. Creation costs can be lower which can help earn more profit. The monopoly may be able to achieve substantive economies of level due to greater plant, centralised supervision and the avoidance of needless duplication.
Division of labour: As how big is the company expands, division of labour is needed and it can be worked more efficiently.
Market leader: The merging of the two companies will make Boeing to become the market leader in the industry. Boeing may then be benefited from being truly a market leader as it could set the market price for others to follow.
Furthermore, I would like to analyse the professionals and disadvantages about the takeover of the Manchester United SOCCER TEAM.
Firstly, if Sky Broadcasting buys the Manchester United Football Club, it may then be able to secure their broadcasting right over the Premier League soccer games. As a result, those who wants to watch live sports matches on television had to sign up with Sky, buying both a simple package and the excess Sky sports channels; Sky thus experienced a monopoly. Therefore, this is probably a very lucrative source of earnings and thus gain the government as it might contributes a huge amount of taxes.
However, the federal government intervention in cases like this may be against the general public interest. As if Sky Broadcasting is suspended from purchasing the Manchester United SOCCER TEAM, it is more unlikely to become a monopolist in the industry. Because of this, the available plans of broadcasting the football game titles may be spread out. Audience may suffer from this example as fans wishing to watch most of them would need to buy several packages.
Under this situation, Sky Broadcasting and the government will both be the winners and the sports followers and consumers will be the losers.
In the other circumstance, there are some advantages and disadvantages above the merging of the Boeing and McDonnell Douglas.
First, when i mentioned before, Boeing may be benefited from economies of size, devision of labour and being truly a market leader.
However, Boeing could become a monopolist in cases like this as it's the world's premier commercial jetliner company due to its complete give attention to airplane operators and the passenagers they provide. As a result, other jetliner supplier may suffered out of this situation as Boeing will get the most gain in the industry, which contributes more fees to the government.
On the other palm, the air travel companies may undergo as they do not have many choice but Boeing when they buy aeroplanes. This may also lead to an increase in price of flight tickets.
To conclude, Boeing and the government will be the winners in cases like this. Regrettably, consumers and flight companies would be the losers.
