Question

What is the difference between a monopoly industry and a competitive petroleum industry in terms of output and price in a static and dynamic sense?

Answer 1

Monopoly industry consist of one firm where as a competitive petroleum industry is an oligopoly industry which consist of few firms. Monopoly industry make completely different goods where as competitive petroleum industry make similar goods.

Since competitive petroleum industry has many firms selling similar goods, the output is large compared to monopoly industry. In a monopoly industry there is no competition. So the monopolist overcharges the prices of products. That is monopoly industry charges high price for products. Where as in oligopoly industry charges fair prices, since it has littile competition.

Static price is single price or fixed price. Dynamic pricing is when seller moves price up and down quickly. Prices in oligopoly industry remains unchanged for a long period of time. That is their price is fixed for some period.They change the price of product annually or bi- annually. So that the result lowers the profit margin for the industry.

For monopoly industry different customers have to pay a different price for the same product. That is dynamic pricing is more in monopoly industry than oligopoly industry. So that it maximize profit with each customer in monopoly industry.

The setting of price is done in monopoly industry based on the demand of consumers for the product. But in oligopoly industry setting of price is done based on competitors prices.