The concept of Monopoly Essay

In every economic system, the principle of monopoly is critical. Indeed, various considerations should be considered when answering the question of whether a monopolist will charge whatever they wish because they are the only source present. To begin, it is important to recognize that since one is the sole provider of a given product or service, they have pricing stability and there are no rivals (Chen, & Schwartz, 2013). The problem is exacerbated by the fact that demand is high, which will result in a rise in pricing due to monopoly.
The car industry is a classic example of an oligopoly. For instance, in the United States, there are three primary manufacturers of automobiles which include Ford, Chrysler, and GMC. The identified manufacturers control the market share.

The example suits the definition of an oligopoly because there are a few select industry players who control a particular industry. In the case presented, Chrysler, Ford, and GMC are in control of the market, and they tend to cooperate with each other with the objective of gaining. Also, an oligopoly is defined by the fact that the companies have an influence on the industry (Horstmann, Kraemer, & Schnurr, 2016). Indeed, in the case presented, the three automobile makers have a significant impact on the market.

Role of Advertising

Advertising plays a critical role in the determination of the manner in which consumers make purchases. In the automobile industry, advertising serves to inform customers of different products that exist. Thus, they can choose to buy any vehicle that is available in the market based on the information provided through advertisement.

The sentiments on advertising and oligopoly are consistent with the course materials. In general, the perception of the two concepts is a confirmation of the consistency with the insights learned in class.

References

Chen, Y., & Schwartz, M. (2013). Product innovation incentives: Monopoly vs. competition. Journal of Economics & Management Strategy, 22(3), 513-528.

Horstmann, N., Kraemer, J., & Schnurr, D. (2016). Oligopoly competition in continuous time.