Similarities and differences between monopolies and oligopolies Essay Example for Free

Similarities and differences between monopolies and oligopolies Essay According to Mankiw, N. G. (2004) monopolies and oligopolies can be defined as: Monopolies are based on a market where there are several buyers but only one seller of a product or service whereby the seller sets the price for products and services provided. Oligopolies are based on a market where there a few companies own or control the production of a product or service whereby the few companies control the market of products and services provided. Differences: Monopolies have only one seller. Oligopolies have at least two or more sellers. Monopolies offer only one product or service. Oligopolies offer more than one good or service. In monopolies the seller can set the price without competition. In oligopolies the sellers set prices based on competitor prices. Monopolies usually exceed marginal profits. Oligopolies usually meet marginal profits. Monopolies are unable to achieve any level of profit they want due to high prices that reduce consumer purchases. Oligopolies have a better chance of achieving the level of profit desired because prices are lowered to raise consumer purchases. Monopolies usually have no close substitute for products or services offered. Oligopolies usually have a small number of close substitutes for products or services offered. Similarities: Both monopolies and oligopolies consist of large organizations Both monopolies and oligopolies hold considerable market control over specific products and services. Both monopolies and oligopolies hold specific copyrights for products and services provided. Both monopolies and oligopolies are affected by increased production in the fact that higher production reduces the price of products and services. Both monopolies and oligopolies are able to achieve a monopoly on production id specific products or services under copyright. Both monopolies and oligopolies impact the production and sale of products and services. HOW WOULD YOU CLASSIFY MICROSOFTÂ ©? I would consider Microsoft to be an oligopoly company because there are several other companies that offer similar products. However, given that Microsoft holds copyrights to specific software such as Microsoft word, Microsoft Visio, and so forth O do believe that they are moving closet to becoming a monopoly company. HOW WOULD YOU CLASSIFY THE POWER INDUSTRY IN YOUR AREA? EXPLAIN YOUR REASONING. My first thought was that the power company in my area (Hampton, Virginia) would be a monopoly. However, after some research I believe that the power industry in Hampton, Virginia would be considered an oligopoly because there are several different companies offering the same services. According to Google (n. d. ) some examples of local companies offering similar services include but are not limited to: Dominion Virginia Power www. dom. com Jacqui Electric Company www. jacquie. com. au Bay Electric Co. Inc. www. bayelectricco. com. References Mankiw, N. G. (2004). _Principles of economics_ (3rd ed. ). Chicago, IL: Thomson South-Western. Google (n. d. ). Local business results for electric company near Hampton, VA. Retrieved February 6, 2008, form http://www. google. com/search? sourceid=navclientie=UTF-8rlz=1T4ADBR_enUS207US207q=electric+company+hampton+VA.