Monopolies Advantages And Disadvantages Essay

Monopolies are generally considered to be a disadvantage. However, in some circumstances monopolies can have many advantages for consumer’s social welfare. Having a monopoly means being the only seller, leaving you with no competition. In a monopoly the seller controls the prices of the particular product and or service; they also make the prices. Some of the few advantages of a monopoly are that monopoly avoids duplication and waste of resources, due to the fact monopolies make a lot of profit they can help invest for better technology and resources. Some disadvantages about having a monopoly are that consumers and buyers may be charged high prices for low quality goods and or services. Also, because there is no competition when there’s …show more content…
If I were hired by the Brazilian government I would step in and limit the formation of the monopoly. I believe the accumulation of power and leverage on behalf of the suppliers largely revolves around the fact that monopolies can ultimately control supply in its entirety for a specified product or service. Through using this control, a profit maximizing monopoly could create societal risks such as, price discrimination, which means they would have control of the entire supply, and allows them to charge customers their desired prices, which most of the time are not standard prices. I believe it is unfair to the buyers and consumers that they should only have one choice and have to pay the desired amount for the services and goods, due to having this monopoly. While having a monopoly we may also experience reduced efficiency due to the fact that the competition is closely linked to incentives. As a result, no competition will provide the monopoly little reason to improve internal inefficiencies. Another impact it can make in our society is cause a deadweight loss, which usually occurs when a monopoly chooses to produce less and charge more. It can even lead to an inefficient economic outcome. Monopoly power can be controlled, or reduced, in several ways, including price controls and prohibiting …show more content…
Another way of tackling the problems of monopoly is to remove the barriers, which prevents the growth of competition. New permits and licenses can be issued to potential producers. The formalities and administrative procedures can be made more flexible to encourage the entry of new firms. Moreover if a domestic monopoly is protected from foreign competition by existence of a tariff, which restricts imports, the government might reduce or remove this tariff. The government can also impose a lump sum tax (fixed tax, such a tax would not place unnecessary burden on the consumers and it has no effect on the monopolists’ price and output. The main aim is to remove away part of the monopolists’ profits. This is seen in the diagram below. Equilibrium output and price is unchanged after the imposition of the lump sum tax. The effect of the lump sum tax is seen in the new Average cost. A higher total cost means a higher average cost curve. With the New average cost, profit level is