The theory of monopoly. Monopolistic competition.

The essence of monopoly is characterized by three features: concentration of considerable proportion of production, which provides preponderant position in the sphere of market and the market in all of the monopoly; the opportunity to dictate the prices to the market; getting high monopoly profits as a result of economic rule of the monopoly in the market.

The forms of monopoly are improving with the development of process of monopolization. The easiest forms are: conventions, rings, pools, corners. Then cartels, syndicates, trusts, concerns, conglomerates appeared.

Unfair methods of competition:

1. Dumpingis selling products at cost price or lower with thepurpose to defeat the competitors and later to increase the prices in order to cover the losses.

2. Cartelis an agreement by competitors to fix the price atthe level which is usually higher than the equilibrium price. Hence the other name of this method, namely, a price-fixing agreement.

The consequences are obviously that under these conditions the market forces – supply and demand – do not produce an equilibrium price and the consumers pay more. Therefore, dumping and cartels are considered illegal practices in many countries. Anti-dumping and anti-monopoly laws prevent such practices, in particular in the USA.