Summary: Monopoly Market In China

A monopoly firm is defined as a market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute (http://economictimes.indiatimes.com/definition/monopoly) .With the following definition in mind we can say that China is being a price maker for the earth’s rare elements which is the fundamental for the production of certain finished goods such as LCD TV, Monitors. China has all the earth's 17 rare elements . In this analytical essay we will go through how could China restricting supplies of rare earths for export be seen as a way of creating market power in the supply of finished goods which use rare earths

As it accounts about 50% of the world’s production of rare earth elements. With the definition for monopoly in mind we can say that China could be a monopoly as it holds the most percentage of the rare earth element than any other country around the world, And also as these rare elements does not have any close substitute it is quite straight forward that China is being the monopoly for these rare earth's

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China has taken many steps to standardized itself as a monopoly just like reducing the supply ,etc. For instance as China is a natural monopoly ,if it produces large number rare earths element its average total cost (ATC) will decrease .

Q1 Q2

The following graph shows that when the quantity is increased from Q1 to Q2 the ATC falls from P1 to P2 .

Similarly if they restrict the supply the price will increase simontineously .

P1 B MC (supply curve ) Ppc C