What is the role of monopoly in microeconomics?

microeconomics is an entertainment of the economy that studies the way in which individual companies perform their affairs in relation to management and finance allocation. Monopoly refers to a situation in which one company covered the market with the exclusion of other businesses. The role of a monopoly in microeconomics is the fact that the monopoly affects the way individual companies can effectively carry out their business and financial affairs.

One of the roles of the monopoly in microeconomics is the effect on the prices of goods and services. Companies that have a monopoly on a particular market can set prices of goods and services on this market. For example, in some countries where some companies supported by the government have a monopoly for certain services and services such as gas and electricity, such companies are able to set prices for the use and consumption of these services. On the market without a monopoly, the competition will lead to greater diversity and Will serve as an effective price for price regulation.

Another role of monopoly in microeconomics is the fact that the monopoly serves as an obstacle to the participant of new enterprises into the market sector. This is due to the fact that monopolists have a goal to protect their interests on the market. The interest in the interests varies and includes the desire to maintain the power that monopolistic leads on the market or the desire to maintain the current high level of profit. Such high profits will inevitably drop if the competition is placed on the market.

These barriers can be structural, which means they are the result of wide gaps in production costs. Barriers can be strategic or can be legal. The legal barriers that create a monopoly are those that have been created for the effect of the law. The influence of the monopoly on microeconomics is the incapitated microeconomic concept of sunk costs.

sunk costs when a new company decides to stay on the established market to use the new one. Unwillingness to let go of a new and potentially lucrative market is causedthe cost of leaving the old market. For example, a company that records reduced profits on its current market can be reluctant to take advantage of the benefits offered in a new one after considering the costs they will have. These costs include loss of investment in advertising, material structures, market research and analysis.