HI5016 International Trade & Enterprise

Monopolistic competition and Oligopoly markets in the world market and its
effects on Trade and countries (which industries and by which countries at least 2
to 3)
Monopolistic competition is a type of imperfect competition such that many
producers sell products that are differentiated from one another and hence are
not perfect substitutes.
MN characteristic
- Many sellers -> small market share
- Free trade agreement
- Differentiated products but highly substitutable (even imperfect
substitute)
MN advantages
- There are no significant barriers to entry; therefore markets are relatively
contestable.
- Differentiation creates diversity, choice and utility. For example, a typical
high street in any town will have a number of different restaurants from
which to choose.
- The market is more efficient than monopoly but less efficient than perfect
competition - less allocatively and less productively efficient. However,
they may be dynamically efficient, innovative in terms of new production
processes or new products. For example, retailers often constantly have to
develop new ways to attract and retain local custom.
MN disadvantages
- Some differentiation does not create utility but generates unnecessary
waste, such as excess packaging. Advertising may also be considered
wasteful, though most is informative rather than persuasive.
- As the diagram illustrates, assuming profit maximisation, there is
allocative inefficiency in both the long and short run. This is because price
is above marginal cost in both cases. In the long run the firm is less
allocatively inefficient, but it is still inefficient.
http://www.economicsonline.co.uk/Business_economics/Monopolistic_competit
ion.html
Monopolistic
- 2 industries
- 2 country
- AUS

- Dominant shared in which nation

- Benefit & issues

- Why the are strong?

 - Why so much market share?

- Benefit

- Issues

http://www.abc.net.au/news/2016-04-22/gas-supplier-monopoly-pricing-hits-
domestic-users/7350338