Question

Give an example of a monopoly. Explain why you think it is bad and/or good for the consumers.

Answer 1

A monopoly is a firm which is sole seller of it's product in the market .Their is no close substitute of it available in the market . Their is no competition of the firm in the market .it can charge whatever price it feels comfortable. Most common example of monopoly is Microsoft .

We can't imagine a computer without Microsoft . Microsoft has still pure monopoly in many tech softwares and hardware's .

Pros of monopoly :

1) monopoly always produces economies of scale .As due to huge demand their production is very high .This helps firm to produce at a large scale with less cost

2) provide quality product and invest in future product .monopoly charge good price and the profit is invested to maintain it's competitive edge , in future upcoming products and in technology and machinery .It provide better quality product .

3) monopoly bring regular updates in their product and improves quality of their goods with regular period of time , so that competition becomes more difficult and their place is not touched by any other firm.They spend alot to maintain their level

Cons :

1) major loss to consumer is that monopoly charge high price and will never lower it . As due to simple seller and high demand in the market monopoly charge whatever price they feel like and consumer is forced to pay it as it doesn't have any option to it .

2) quality issue may arise in monopoly .As their is single seller in the market some monopoly take it as granted and do not maintain quality of it's goods .

3) monopoly in order to earn extra ordinary profit may indulge in unethical practises .They may decrease supply or restrict material so that price in the market can increase. As supply decreases price will rise which will help monopoly to earn high profits .

So monopoly both have good and bad affects on customer