Do_Pure_Monopolies_Exist

Do Pure Monopolies Exist' An Examination of Remote Area Businesses ECO 100: Survey of Contemporary Economic Issues June 3, 2013 Do Pure Monopolies Exist' An Examination of Remote Area Businesses With a thought in question; how many single businesses within the vast communities in which we live are sole providers of a single product offering no close substitutes while controlling price and facing no competition' Although it is hard to fathom, in some communities, pure monopolies do exist and in a significant manner. While pure monopolies are not so prominent in large communities or metropolises, they are present in small, remote communities where businesses are scarce requiring small populations to rely on what these businesses have to offer. Within the course of this essay, I will not only explain just how pure monopolies exist, but will provide relevant examples in proving my understanding pertaining to monopolies and how they work. First and foremost, a pure monopoly is regarded as “an industry in which one firm is the sole producer or seller of a product or service for which there are no close substitutes” (Brue, & McConnell, 2010, p. 217). Although pure monopolies are rare and infrequent, they do exist just as well as near monopolies or monopolies "in which a single firm has the bulk of sales in a specific market" (Brue, & McConnell, 2010, p. 217), both being based on de facto industry standards. Examples of a pure monopolies are usually in the form of public utilities to include water, sewer, electric, gas, and local telephone companies (Brue, & McConnell, 2010) while near monopolies may entail “a single gas station in an isolated rural town” (McGowan, 1999, p. 1) or computer firms that produce the majority of micro-processors used in our computers. Residing in such a small, remote community in Southwestern Arizona, I not only experience pure monopoly, but near monopolies as well. I work within the utility industry which provides the nectar of life, or potable water if you will, to an entire community being the sole provider of this product with no substitutes or competition from outside sources. Although there are two other water purveyors which service other districts within the town-site area, the company in which I work sell potable water to them at a price approved by the Arizona State Corporation Commission. Although a state regulating committee approves the price a company will sell their commodity, it does not mean that a company cannot ask for price-hikes in the future further enhancing corporate elasticity and solidifying their pure monopoly on the product offered. Gas stations within my town, on the other hand, are near monopolies at best using the remoteness of the area to capitalize on their product(s) offered. With the four filling stations we have in town, two offer premium pricing for their product which the two remaining offer their product at lower prices than the others, but still well above prices at filling stations in communities up to forty miles away. In this situation, it would be unfeasible for one to travel a great distance to save a few cents on a gallon of fuel as well as the time incurred, allowing gas station owners to charge higher prices for their product creating a near monopoly while earning monopolistic profits (McGowan, 1999). This, in turn, binds the community in purchasing gasoline from local stations rather than from outside sources having them pay premium prices for the vital resource placing copious amounts of cash in the pockets of local vendors. In conclusion, pure monopolies do exist in some communities depending on the size that one may reside in. Although pure monopolies are rare and infrequently experienced, they do exist in small, remote towns rather than in large communities where businesses compete in selling the same like products. Within the same reasoning, near monopolies are also prominent as well enabling businesses to regulate prices in which they control a bulk of an item. Throughout this essay, I not only explained that pure monopolies exist, but how they operate and continue to maintain and earn monopolistic profits. Furthermore, I have used real time examples within the community in which I reside solidifying the monopolies thereof and how they affect remote ways of living enhancing my knowledge of monopolies and how businesses capitalize on them. References Brue, S. L., & McConnell, C. R. (2010). Essentials of economics (Ashford Custom 2nd ed.). New York: McGraw-Hill/Irwin. ISBN: 0077329481. Retrieved 5/15/13 from http://online.vitalsource.com/books/0390132292 McGowan, John F., Ph.D. "Standard Based Monopolies and Near Monopolies: The WinTel Example." www.jmcgowan.com/Monopoly. www.jmcgowan.com, 3 May 1999. Web.