Monopoly and USPS Operation

MONOPOLY AND USPS OPERATION 3

Monopolyand USPS Operation

Monopolyand USPS Operation

Oneof the most common and persistent monopoly firms I have used theirservice recently is the United States Postal Service. Therefore, Iselected to discuss the firm as the monopoly to use in exploring themonopolistic market. The key reason why I classified United StatesPostal Service as a monopoly is because it is the sole producer andsupplier of public postal service in the United States. The companyhas been providing this service for a long time, and has nocompetitors. As a result, the firm operates the market with fulldominance in the country.

Anotherreason is that the firm sets its own price and determines thequantity that will clear the market demand. This is because theprices of sending mails and parcels through the company are notdetermined by the price mechanisms. Instead, the firm sets its ownprice. Therefore, to sell more services, the firm will reduce prices,thereby facing a unique demand curve (Mankiw, 2014). Another reasonfor classifying the firm as a monopoly is because the entry of themarket by other players is regulated by the law, as other layers areunable to enter the market.

TheUnited States Postal Service operates as a price maker in the market.This works for the firm relative to the characteristic of lackingdemand and supply as the forces for setting prices. In addition, theUnited States Postal Service operates as the sole provider of publicpostal services in the country. This is relative to thecharacteristic of the market being constrained to new entrants. Moreover, the United States Postal Service operates as a profitmaximizer since it sets its price in the market as relative to thecharacteristic of being a price maker.

References

Mankiw,N. (2014). PrinciplesofMicroeconomics.New York: Cengage Learning