Factors Affecting The Economic Effect Of Monopoly Essay

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There are several important factors regarding to the economic effects of monopoly. The first factor is the price-output combination between pure monopoly and perfect competitive industry. First of all, a pure monopoly is considered to be known as a price maker which means that they have complete control over the price or the amount of quantity that they sell, thus price must be lowered in order to sell more quantity on the market since they do set their own market price. Therefore, if the price for a product decreases overtime, then the quantity supplied (market supply) for that specific product will increase in order to return to its original equilibrium at the level of output where marginal revenue equals marginal cost.
For instance, imagine if Ferrari had obtained control over every single auto manufacturing company on this global spectrum and decided to make a drastic decision by raising the purchasing price for each vehicle that they offer. This would lead to a point where a consumer who wants to purchase a vehicle from them would not be able to afford it, because Ferrari would have full authority to do so since there is absolutely no competition among rival auto manufacturers. As for a pure competitive firm, they are considered to be price takers, meaning that they can sell as much quantity as they desire at a market price, but they cannot raise the original price that is higher than market price. Unfortunately, if a pure competitive firm decides to lower the…

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