INTRODUCTION

Monopoly Competition
Monopoly is an industry that has only one firm that sells a good which has no close
substitutes. Monopoly firms also represent industries because there are no other firms in
the market. Products that are from monopoly market are electricity, water, cable
television, local telephone services and many more. Examples of monopoly firm in
Malaysia is Tenaga Nasional Berhad, TNB's unique position as a monopoly in the
generation, transmission and distribution of electricity in Peninsular Malaysia. TNB is the
only firm that provides us electricity to every building in Malaysia. Another monopoly
firm in Malaysia that only provide sewerage services is Indah Water Konsortium Sdn
Bhd. Indah Water Konsortium is the only firm in Malaysia that mainly responsible for
operating and maintaining the public sewage treatment plants and network of
underground sewerage pipelines.

BACKGROUND OF THE COMPANY

SADA is a wholly owned subsidiary of Kedah Darul Aman and is the successor to the
State Department of Water Resources, which was incorporated on January 1, 2010.
JBA Corporation is a consequence of the amendment of the federal constitution. Water
Services Industry Act 2006 was enacted to be adopted in the water services industry.
SADA operate as corporations, are concerned with the administration of quality and
safeguard the interests of the people of Kedah in order to get clean water to reach the
standards of the Ministry of Health and World Health Organization (WHO).
SADA also supplies clean water to the people of the state with cheaper rates as compared
to other states.

Company Policy
Always putting customers through fast, accurate and friendly
Always emphasizing quality in all business transacted
Always evaluate and make corrections and improvements to the tasks carried out
Always appreciate the corporate values laid down
Always discipline, patience and trust in carrying out its duties and responsibilities
Be open and willing to accept change and new ideas
Always comply with the policies, principles and rules established
Always practice the spirit of cooperation and teamwork
Always strive to improve yourself through improving the excellence of the
knowledge, skill and integrity
Always sensitive to the preservation of the environment
Corporate Values
Appreciate the time
Giving priority to quality
customer First
Value Support
Trust, proactive, knowledgeable, creative, disciplined, innovative, confident, patient,
persevering, openness, teamwork and caring.
Corporate Theme
Integrity, fast and quality to excellence (integrity, speed and quality towards excellence).

The Vision
Being a service company ranking regional water supply.
Mission
Water supply clean, safe and adequate planning and development of water infrastructure
complete. An effective distribution system, the effectiveness of the control, monitoring
water quality, the latest technology and efficient customer service to all domestic and
commercial users. Through the collection can improve the efficiency of managing the
collection, reduction of Non Revenue Water (NRW), minimize operating costs and
diversify revenue sources to enhance the benefits to the company and the state
government (stakeholders).

Profit

Characteristics of Monopoly Competition

1.

A Large Number of Buyers and Sellers

A monopoly exists when there is only one seller of a product. The different between a
firm and an industry does not exist in a monopoly since there is only one seller. A firm in
a perfectly competitive market can react to prices, but cannot affect the prices it pays for
the factors of production or the prices it receives for its output. Syarikat Air Darul Aman
(SADA) be the main and the only water resources supplier that supply to consumer in
Kedah, Malaysia.
2.

Price Maker

In perfect competition, a firm is a price taker because other firms can enter the market
easily and produce a product that is indistinguishable from every other firms product.

This makes it impossible for any firm to set its own prices. SADA the only supplier in the
market and therefore has full control over the market prices and total market supplies that
we called price maker.
3.

Advertising

Advertising in a monopoly market depends on the products sold. If products are luxury
goods such as imported cars, then the monopoly needs some advertisement to inform
consumers about the goods. Local public utilities such as water, electricity, or home
phone services do not need any advertisement from the monopolist since the consumer
knows to obtain such goods. For SADA they rarely use advertisement but they still have
advertisement in web site to inform consumers about them.

4.

Product Has No Close Substitutes

There should not be any close substitutes for the product sold by a monopolist. If there
are any substitutes, then the monopolist cannot charge a price according to he or she
cannot be the price maker. In other words, a monopoly cannot exist if there is any
competition or any substitute product. An example is water supply by Syarikat Air Darul
Aman where water has no substitute.

Advantages and Disadvantages of Monopoly Competition

A monopoly market exists when there is huge number of buyers but small or very limited
number of sellers in the market. Like any other market structure a monopoly market has
its advantages and disadvantages to both the buyer and the seller.
Advantages of Monopoly Competition
1.

Stability of prices
For monopoly market the prices are most of the times stable. This happens because
there is only one firm involved in the market that sets the prices if and when it feels
like. In other types of market structures prices are not stable and tend to be elastic as
a result of the competition that exists but this isnt the case in a monopoly market as
there is little or no competition at all.

2.

Source of revenue for the government

The government gets revenue in form of taxation from monopoly firms.

3.

Massive profits
Due to the absence of competitors which leads to high number of sales monopoly
firms tend to receive super profits from their operations. The massive profits realized
may be used in such things as launching other products, carrying out research and
development among many other things that may be beneficial to the firm.

4.

Monopoly firms offer some services effectively and efficiently.

Disadvantages of Monopoly Competition

1.

Exploitation of consumers
A monopoly market is best known for consumer exploitation. There are indeed no
competing products and as a result the consumer gets a raw deal in terms of quantity,
quality and pricing. The firm may find it easy to produce inferior or substandard
goods if it wishes because t the end of the day they know very well that the items will
be purchased as there are no competing products for the already available market.

2.

Dissatisfied consumers

Consumers get a raw deal from a monopoly market because quality will be
compromised. Therefore it is not a wonder to see very dissatisfied consumers who
often complain about the firms products

3.

Higher prices
No competition in the market means absence of such things as price wars that may
have benefited the consumer and as a result of this monopoly firms tend to charge
higher prices on goods and services hence inconveniencing the buyer.

4.

Price discrimination
Monopoly firms are also sometimes known for practicing price discrimination where
they charge different prices on the same product for different consumers.

5.

Inferior goods and services

Competition is minimal or totally absent and as such the monopoly firm may

willingly produce inferior goods and services because after all they know the goods
will not fail to sell.

The Short Run and Long Run Market Equilibrium In The Monopoly Competition
Short Run Market Equilibrium
1.Total Approach

Profit maximization can be identified by a comparison of total revenue and total cost. The
quantity of output that achieves the greatest difference of total revenue over total cost is
profit maximization. In the middle panel, the vertical gap between the total revenue and
total cost curves is the greatest at 6 ounces of Amblathan-Plus. For smaller or larger
output levels, the gap is either less or the total cost curve lies above the total revenue
curve.

2.Marginal Approach

Profit maximization
can be identified by a
comparison of
marginal revenue and
marginal cost. If
marginal revenue is
equal to marginal cost,
then profit cannot be increased by changing the level of production. Increasing
production adds more to cost than revenue, meaning profit declines. Decreasing
production subtracts more from revenue than from cost, meaning profit also declines. In
the bottom panel, the marginal revenue and marginal cost curves intersect at 6 ounces of

Amblathan-Plus. At larger or smaller output levels, marginal cost exceeds marginal

revenue or marginal revenue exceeds marginal cost.

Long Run Market Equilibrium

In the long
run
monopolist
would make
adjustment
in the size of
his plant.
The longrun average
cost curve
and its
corresponding long-run marginal cost curve portray the alternative plants, i.e., various
plant sizes from which the firm has to choose for operation in the long-run.
The monopolist would choose that plant size which is most appropriate for a particular
level of demand. In the short run the monopolist adjusts the level of output while working
with a given existing plant. His profit- maximizing output in the short run will be where

only the short-run marginal cost curve (i.e., marginal cost curve with the existing plant) is
equal to marginal revenue.
But in the long run he can further increase his profits by adjusting the size of the plant. So
in the long run he will be in equilibrium at the level of output where given marginal
revenue curve cuts the long run marginal cost curve.
Fixing output level at which marginal revenue is equal to long-run marginal cost shows
that the size of the plant has also been adjusted. That is, a plant size has been chosen
which is most optimal for a given demand for the product. It should be care fully noted
that, in the long run, marginal revenue is also equal to short-run marginal cost.
But this short-run marginal cost is of the plant which has been selected in the long run
keeping in view the given demand for the product. Thus while, in the short run, marginal
revenue is equal only to the short-run marginal cost of the given existing plant, in the
long run marginal revenue is equal to the long-run marginal cost as well as to the shortrun marginal cost of that plant which is appropriate for a given demand for the product in
the long run. In the long- run equilibrium, therefore, both the long-run marginal cost
curve and short-run marginal cost curve of the relevant plant intersect the marginal
revenue curve at the same point.

Conclusion
A monopoly is a market structure in which there is only one producer or seller for a
product. In other words, the single business is the industry. Entry into such a market is
restricted due to high costs or other impediments, which may be economic, social or
political. For instance, a government can create a monopoly over an industry that it wants
to control, such as electricity. Another reason for the barriers against entry into a
monopolistic industry is that oftentimes, one entity has the exclusive rights to a natural
resource. For example, in Malaysia the government has sole control over the water
industry. A monopoly may also form when a company has a copyright or patent that
prevents others from entering the market.

Appendices

BIBLIOGRAPHY

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http://knownai.hubpages.com/hub/Advantages-And-Disadvantages-Of-A-MonopolyMarket
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