• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Advantages and Disadvantages of Monopoly’s.

Extracts from this document...

Introduction

ADVANTAGES AND DISADVANTAGES OF MONOPOLY'S In theory, a monopoly exists when there is only one firm supplying the output of the industry. Advantages Discuss Disadvantages Discuss A monopoly may produce at a lower cost than a competitive industry. This is due to economies of scale, which a monopoly is able to exploit more than a competitive firm, as the monopoly is the sole provider of that good, whereas in a competitive industry the firms share the total output. The ability to set prices at what they desire, in order to gain a larger abnormal profit. This may be the case, however, firms are not simply able to charge a price they deem fit for the product, since it is constrained by its demand curve. ...read more.

Middle

It may also be able to bring a lower cost to the consumer as eventually the monopoly can use it to give a return on the initial capital cost. The ability to exploit consumers. This would come from high prices charged to the consumer. A monopoly is able to gain abnormal profit in both the short and long run, as long as the firm's average cost is lower than its average revenue. Predatory Pricing By doing this, prices will be at a low level, so as to defer potential companies from joining the industry as the know that they would not be able to produce at such a low cost, this benefits the consumer, as there is a lower price available. ...read more.

Conclusion

Monopolists' best encourage the process of innovation as they can afford to take a long-term research and development programme. Resource cost of keeping a Monopoly Huge advertising and marketing campaigns will be launched so as to make the most of the monopoly from the firm's viewpoint this will also hopefully lead to consumer loyalty. Government-bestowed monopolies will be greatly sought after, and this involves help from the government in the form of licences, certificates of convenience and things like patents. Not only does it involve these things, but also a great deal of lobbying and hospitality. These will cost the firm a huge amount of money, and this cost will get passed on to the consumer in the form of high prices. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Markets & Managing the Economy section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Markets & Managing the Economy essays

  1. Monopoly. The following is going to discuss that monopoly is always against the ...

    It is shown as figure7: A perfectly discriminating monopoly will continue to increase output as long as MC<P. The consumer is charged the maximum he/she is willing to pay for each unit. The different price of each single unit leads to remove all consumer surplus and take the whole economic welfare.

  2. What are the origins of the Pension Crisis and what can be done to ...

    However, empirical evidence has shown that leaving pensions provisions to the market results in miss-selling and under consumption by individuals who fail to realize the long-term benefits of saving for the future.

  1. What is a Monopoly?

    This results in one company taking over all the stages of production. Creation of a Statutory Monopoly When a policy of nationalisation was being pursued, key industries were taken over into state ownership and run as public corporations with monopoly status.

  2. The Importance of the Canadian Airline Industry.

    When CP Air received carrier rights in the Pacific, a two airline international system was born. Regional markets served by different carriers were created in 1966, but were not allowed to compete against the two major airlines (Williams 94).

  1. what is economics

    * Two cases are: o Where the price set by producers is too high * If the tour operator for holidays thinks that consumers would be willing to pay �400 for a holiday, they will supply 1,100 holidays * Consumers, however, at �400, would only want to buy 650, leaving

  2. Economics - Monopolists

    to control the number of operators in their market, through restriction in supply. An example of this is the De Beer Company, they control the world supply of diamonds. Controlling the amount supplied to the market ensures high prices are maintained and helps to maximise profits.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work