Question

Is a monopoly market good or bad? support your viewpoint based on relevant content.

Answer 1

In the short term they aren't much of a problem but in the long run they are big problems because: 1. Monopolies stop competition. The whole point of a free market is to have competition so that companies are always improving. Without competition companies become inefficient and wasteful. 2 . Monopolies stop creating new technology. As pointed out by the other answers monopolies have little incentive to do any research and development. Why create new products when you control an entire industry? R & D is extremely costly and without incentive to do it monopolies will not take on that cost. 3. Monopolies drive up prices. Without competition monopolies have complete control over prices. Are monopolies going to keep prices down when the completely control a market? Heck no! Just look at the diamond industry which is controlled by the monopoly of De Beers. Are diamonds cheap? Heck no! Don't just think that diamonds are rare so that is why they are expensive. De Beers has underground warehouses full of diamonds because they want diamonds on the market to berare and expensive. 4. Monopolies get too powerful. The government had many problems with the power of monopolies. When a few men control most of an economy they hold all the cards and that is very bad for a democracy. The powers of the monopolies lead to corruption and the government having little control of the economy. Think if we still had a monopoly on oil today like Standard Oil. How powerful would one company be if they controlled 95% of the US oil market? Many industrial countries think OPEC is bad but OPEC does not control the refining and point - of - sale that monopolies do. Who would have more power in the US: the president or the CEO of Standard Oil? The CEO of a modern day Standard Oil could bring the US to its knees overnight with a price increase of gas to $ 8 / gallon.

Monopolies over a particular commodity, market or aspect of production are considered good or economically advisable in cases where free-market competition would be economically inefficient, the price to consumers should be regulated, or high risk and high entry costs inhibit initial investment in a necessary sector. For example, a government may sanction or take partial ownership of a single supplier for a commodity in order to keep costs to consumers to a necessary minimum. Taking such actions is in the public interest if the good in question is relatively inelastic or necessary, that is, without substitutes. This is known as a legal monopoly or, a natural monopoly, where a single corporation can most efficiently carry the supply.

Natural monopolies are often found in the market for public utilities, relatively high-cost sectors that deter capital investment. The government may then support the total market share of a single corporation in providing water, electricity or natural gas to its public. In doing so, both government regulation of the price of a necessary good and a continuous supply is guaranteed, with external competition curtailed by the formation of a monopoly.

Two examples of government-sanctioned monopolies in the United States are the American Telephone and Telegraph Corporation (AT&T) and the United States Postal Service. Prior to its mandated break up into six subsidiary corporations in 1982, AT&T was the sole supplier of U.S. telecommunications. Since 1970, the United States Postal Service has been the sole courier of standardized mail across the U.S.
Government-sanctioned monopolies need not always be for reasons of economic efficiency or consumer price protection, however. Nine of the 52 states of the union operate legal monopolies of hard-liquor sales.