Question

Make an argument as to why Society should encourage the formation of monopolies.

Answer 1

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Question:

Answer:

Monopoly is a market where there is only one seller (producer) and that firm selling a unique product in the market with zero sustitutes. The firm is price maker and have control over the supply of that particular product. Firm is itself and industry and threre is no entry for the new firm.

Advantages of monopoly:

Normally people and the government do not favor monopoly and promote and support a highly competitive market. But its not mandatory or not true always that a monopoly harm industry and consumer's interest. A monopoly firm have fully commond over the supply of product and increasing demand not only incraese price its also increase production level and increasing production level increase the productivity or firm and help in achieving economies of scale. Other side increasing price increase its profitibility and its increase its spending over R&D that help in increasing the efficiency of the firm and the firm also earn though petents. Other side the government has right to control price level. When the firm increase price excess that affect the consumer's surplus and welfare of the society worst then the governmnet can impliment the price control policy like, price ceiling. So, i think the society should support monopoly because its save time of customers that they spend over the product selection, comparision etc before buying. It can also increase welfare of the society through their R&D and increasing economies of scale of firm will help to the society also. The government also help in case of damaging social welfare or consumer's interest due to monopoly. So, i think Society should encourage the formation of monopolies.

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