Economics assignment Example | Topics and Well Written Essays - 1000 words

Economics - Assignment Example Both oligopolies and monopolies are affected by the increased production in the sense that higher production decreases the prices of products and services. The two market structures, unlike other market structures, are able to attain a monopoly on production in the specific goods or services under their copyright (Albano & Lizzeri 1997). Monopolistic markets are solely controlled by a single seller only. The seller has absolute power to influence market decisions and prices. Consumers attain limited choices, and they have to make a choice from what is being supplied at the market. Conversely, oligopoly is characterized by few sellers in the market. The market situation is friendly to consumers since it encourages competition among the sellers (Spanjers 1994). A monopolistic market gets its power from three sources: these include, legal, economic and deliberate. A monopolistic market will make into use the position it has to its advantage and completely drive out competitors. It can achieve this either through reducing prices to such levels that existence for another firm may become nearly impossible or through virtue of economic situations like large capital requirements when starting companies. Though an oligopolistic market situation does not have sources of power, it, however comes into existence merely due to the accommodating character of other sellers already in the market (Spanjers 1994). A monopolistic market might quote very high prices because of nonexistence of other competitors. The monopolistic sellers will make use of their status of dominance in the market and maximize their profits. Oligopolistic markets, on the other hand, ensure competition in the market hence fairer prices for the consumers (Spanjers 1994). These are regulations that are put into place to prevent entrance of firms into the market. Barriers to entry into