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- QUESTION
Assignment Details
You have learned that some markets are competitive but that there are also a few markets that are serviced by just one firm. Examples include utility companies that provide electricity and natural gas to homeowners.
Please draw on your own experiences and what you have learned in Unit 4 to discuss the following points. Please use economic concepts; and use references in your main contribution.
Please identify and describe your local utility.
Please explain what products or services it provides.
Are there other companies that provide these products in your community?
Have prices increased in the last 2 years? Please explain.
Do you think prices would be higher or lower if there were 2 or more providers? Please explain.
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Answer
Monopoly Market Structure
Consumers need to have the freedom to choose the companies that supply them with products or services. However, in some sectors of the economy, consumers do not enjoy such rights because of the existence of only one company offering the services. Economists refer to such a market structure as a monopoly. Companies providing utilities such as electricity often enjoy monopoly, stemming from the government's need to regulate such industries and the massive initial capital requirement that prohibits new entrants into such industries.
My local electricity company, Baltimore Gas and Electric, offers both electric and gas services. The company enjoys a monopoly in the market as it is the sole supplier of the two crucial services in the area. All the houses in the country depend on the company for electricity and gas utility needs. Since the company operates in a monopoly, no other companies are offering similar services. Daughety and Reinganum (2018) assert that in a monopoly, a single company controls the market and offers customers the products and services needed. Without any other option, the customers have no choice but to transact with the company.
The prices charged by the company have risen consistently over the past two years. For instance, in 2019, the company filed a request with the Maryland public service commission to increases their rates for electricity payed by customers. The increase in the rates charged by the company has continued to rise, forcing customers to pay since they do not have a choice. According to Seim and Waldfogel (2019), in a monopoly, customers are price takers. The lack of choice due to the presence of only one firm leaves them at the mercy of the firm, thus forcing them to accept and pay prices charged by the company.
The prices would have been lower if two or more firms were operating in the region. The competition for customers would introduce price as a competitive front, making some of the companies lower their prices to attract more customers and increase their market share.
References
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Daughety, A. F., & Reinganum, J. F. (2018). Market structure, liability, and product safety. In Handbook of Game Theory and Industrial Organization, Volume II. Edward Elgar Publishing.
Seim, K., & Waldfogel, J. (2019). Replication data for: Public Monopoly and Economic Efficiency: Evidence from the Pennsylvania Liquor Control Board's Entry Decisions.
Appendix
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Appendix A:
Communication Plan for an Inpatient Unit to Evaluate the Impact of Transformational Leadership Style Compared to Other Leader Styles such as Bureaucratic and Laissez-Faire Leadership in Nurse Engagement, Retention, and Team Member Satisfaction Over the Course of One Year
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