• 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 ...

    Profits are also maximised by charging a higher price in the inelastic market and a lower price in the elastic market. It is illustrated by figure8: As above toughed, there are many factors involved in against public interest for monopoly.

  2. What is a Monopoly?

    These are the sources of monopoly power because they do not allow/restrict rival firms entering their markets, so they can be the sole producer/provider in that particular market. Diagrammatical analysis of the monopoly diagram Are monopolies a bad thing? Cost Benefit Analysis The economic and social costs of monopoly Exploitation

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

    Tax increases might lead to disincentives to work, those on low incomes might feel they would be better off claiming benefits after the tax deductions. Others may find that the marginal benefit of working an extra hour doesn't exceed the marginal benefits of an extra hours leisure time.

  2. The Importance of the Canadian Airline Industry.

    Although regulation of the airline industry was originally considered to be a positive move, it posed serious problems. Studies conducted by researchers in the United States in 1965 and 1970 revealed that, on average, fares were higher in a regulated market than in a market that was deregulated (Williams 107).

  1. 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.

  2. What Are The Effects Of Tescos Oligopolistic Market Structure, On Both Consumers And Producers?

    They might lose the competitive edge in the market and suffer a long term decline in market share and profitability. The prevailing strategy for both firms is probably to go ahead with research and development spending. If they do not and the other firm does, then their profits fall and they will lose market share.

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