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Types and Drawbacks of Monopoly - Term Paper Example

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The author concludes that monopoly is not a healthy market condition as far as the consumers are concerned. The seller always tries to incorporate the maximum possible price for his product. In a monopolist market, the seller can determine the price because of less competition …
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Types and Drawbacks of Monopoly
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Download file to see previous pages The main advantage of a monopolistic firm is that they can fix the prices of their products comfortably in the absence of any kind of competition. The sufferer will be always the consumers since they have not many options left. 
“In the absence of government intervention, a monopoly is free to set any price it chooses and will usually set the price that yields the largest possible profit” (Stigler Small scale industries may not develop if a monopoly exists in the market. Even though monopolist market conditions are legal, in many countries it is legally controlled in order to save the interests of the customers. “In a free-market economic system, people work to make money and companies exist to make a profit: individual companies want to make as much profit as possible. Certainly, companies would love to be monopolies if this meant that they could make greater profits, as it most certainly would.” (The Choice is Us: Monopolies)
An industry is said to be a natural monopoly if it produces the desired output at a lower cost than two or more firms. Examples of natural monopolies are public utilities like railways, telecommunications, water services, electricity, and mail delivery. Most of these utility services were controlled by the government itself in many countries and no private participation are so far reported in these sectors. A natural monopoly and monopoly are entirely different concepts. A natural monopoly describes a firms cost structure whereas a monopoly explains market share and market power. 
Most of the natural monopolistic areas need large initial investments and hence small firms may not be able to compete with such natural monopolistic areas. For example, consider the case of railways or water supply. ...Download file to see next pagesRead More
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