Economics questions....?

Question

Suppose the candy bar industry appoximates a perfectly competitive industry. Suppose also that a single firm buys all the assests of the candy bar firms and establishes a monopoly. Contrast these two market structures with respect to price, output, and allocations of resources.

Little help? I'm not so good with this subject....

Answer 1

In a competitive industry where many firms compete with each other for custormers.  Some firms try lure customers from each other by increasing their efficiency and lowering their prices.   Other firms try to innovate and create products that are better in some way than those of their competitors.

And when one firm succeeds in becoming more efficient or creates some better product.  Then other firms have to copy that success and do the same in order not to loose their customers.

But if there is only one firm that doesn't have any competitors. Then its management has no fear of loosing customers to competitors.  And for this reason they can do what's best for themselves and their company at the expense of their customers.  They can increase their own salaries and hire more workers to make the work easier.  And to pay for it all they can raise prices for their customers.

And a company that has no competitors doesn't need to create better products than before.  Because such experimentation and innovation is an unnecessary expense for them.  Their customers will come to them anyway because there is no competition.