Advantages Of Pure Monopoly

Pure monopoly is the market structure where a single firm dominates the market (or it takes over eighty-five percent of market shares). Because of the characteristic of a single seller in one particular market, the dominant firm has the monopolistic power to set the price of products and to determine the quantity of products sold on the market. Basically, monopoly exists due to barriers for new firms to take place in that market. Moreover, because of monopoly firm’s strategy: the firm only produces less than the quantity demanded by the market, and the price it sets is always higher than the price consumers are willing to pay; then when talking about monopoly, we, consumers, both generalize monopoly as an inefficient market structure. However, still under the eyes of a consumer, I argue that this structure provides advantages as well under some circumstances. In this paper, I will present my analysis on the advantages of pure monopoly on its consumers and social welfare. …show more content…
Based on that idea, we can derive that monopoly firms also can be formed when government grants them the right to monopolize in particular markets, such as post office services, water and power, public transportation, etc. The characteristic of enjoying economies of scale to prevent competition of incumbent monopolies is the big win for customers when it is applied to those government monopoly firms. Economies of scale are when the average cost of production is declining as output expands. Let’s take a look at the economies of scale diagram