ECON 101 Saudi Electronic University Market Power Questions


Write a one to two page paper, addressing the following:
a. Describe in your own words the concept of market power.
b. What are the three reasons that a market might have a Monopoly?
  c. Give an examples of two monopoly Firm exercising its market power.
answer the question above
give your opinion about the two student answer of the question above
the 2 student answers:
answers 1-
A) Market Power
Market power is the ability of a company to determine the market value of a particular product or industry in general.
#Factors influencing market power: –
1. Number of companies in a market for a company to have great market power in the sector in which it operates, the sector should not be very populated.
2. Product Differentiation if a business can offer differentiated products and services that fill a gap in the market, it will gain market power.
3. Pricing Power if a firm offers distinct products and services or has a significant market share, it can, to some extent, price its products and satisfy inelastic customer demand.
4. Mobility factor if a sector offers the same ease of access to inputs as its products or services, the market power of individual firms will not improve.
B) Monopoly:-
Monopolies can be seen as an extreme result of free market capitalism in the sense that, in the absence of restrictions or restrictions, a single firm or group becomes large enough to own all or most of the market.  Particular type of product. Or service. In a monopoly, the firm can change the price and quantity of the good or service. In an elastic market, the business will sell a large amount of the good if the price is lower. If the price is high, the business will sell a small amount in an elastic market. Also In a monopoly, a seller produces the entire output of a good or service. The entire market is served by a single company. For practical reasons, the business is the same as the industry. The monopoly decides the price of the good or product sold. The price is set by determining the amount to be requested at the price desired by the company.
Oligopolies exist for three main reasons:
1. Government barriers to entry: the government may limit the number of firms in the market.
2. Economies of scale in production: similar to natural monopoly, but with smaller scale economies that are not large enough to generate a natural monopoly.
3. Advertising campaigns: Breaking into some markets can be difficult without a very large and expensive advertising campaign
C).Utility industry and Andrew Carnegie Steel Company are example of monopoly market.
* The utility industry is a monopoly. Utilities monopolies provide water, sanitation, electricity, and electricity, such as natural gas and oil, to towns and cities across the country. However, the sector is heavily regulated to guarantee consumers fair prices and adequate services.
* Andrew Carnegie Steel Company: – Established a vertical monopoly in the steel industry by taking control of all levels involved in steel production, raw materials, transportation and manufacturing to distribution and finance. By 1897, it controlled almost all of the steel industry in the United States.
answers 2-
It is the firm’s ability to change the price of an item in the market through a change in the level of supply and demand, or both.  It can be understood as the level of influence that the company has in determining the market price.
A company with market power has the ability to change at the market price and control the profit margin and its ability to increase obstacles before new entrants to the market are often known as women price makers because they have the ability to determine how to adjust the market price to an item without abandoning its share in the market.
1- The government gives the exclusive right to a single production company.  The government can restrict market entry by law, for example, through patent laws, which may lead to monopoly.
2- Ownership of the main supplier for one company a company that holds exclusive ownership of a major supplier can restrict access to the resource and create a monopoly. 
3- Economies of Scale a company can provide a product at a lower cost than two or more companies can offer.
An example of market power: When the iPhone appeared in the beginning by Apple, it had a large market because it mainly determined the market for smart phones and applications with the availability of the product for a short period of time.  The cost of the iPhone is high due to the lack of competition, and the iPhone prices have been set by the company, not by the market.
An example of a monopoly: The American Tobacco Company has maintained unique control over the tobacco stretches of the market.  Government regulations did not exist in the beginning, however, after the establishment of the antitrust regulation, it was dismantled.
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Explanation & Answer:
3 Questions

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monopoly power

market power

The American Tobacco Company

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