Answer to Question #249355 in Microeconomics for Dia

Question

Write in brief about policies of Monopolistic markets.

Answer 1

Monopolistic policy.

This policy gives authorization to one firm to trade in a specific commodity while no other firm is allowed to do so.

Competition policy.

A firm is said to operate in a dominant position if it controls over 40 percent of the good or service being referenced. The market can be abuse through actions such as charging excessive prices in order to earn monopoly profits and imposing terms and conditions that are restrictive to the supply of goods. Market abuse may be tolerated such thathigher prices and profits are condoned due to their reflection of exceptional innovativeness. Low profits may not signify effective competition but but indicates gross inefficiency of the firm.