Question

What are the main objectives or goals of monopolies? But what is the downside of monopolies in a capitalist free-market economy?

		Monopolies want to have sole control of production, distribution, and supply of a good or service. Despite monopolies’ massive expansion and dominion of one market, it creates a market failure in competition. In the lack of competition among many businesses, monopolies are sacrificing quality in products.
		Monopolies want to have sole control of production, distribution, and demand of a good or service. Monopolies’ massive expansion and dominion of one market, it creates a market failure in competition. In the lack of competition among many businesses, monopolies are sacrificing quality in products.
		Monopolies want to have sole control of multiple businesses to guarantee a steady supply of money. Monopolies provide a constant supply of money for those businesses and corporations who are part of big companies. At the same time, monopolies ensure that the market gets competitive. Monopolies assert their market competition through the federal government. They want the government to pass regulations to guarantee equal competition among big businesses at the same time to provide fair market competition to small businesses. In addition, big companies provide and ensure quality in products, but at the end of the day, consumers would dictate which business offers better products. This factor causes companies to continue improving products’ quality.
		Monopolies want to have sole control of one business and use it to control politics. Monopolies provide a steady supply of money for those businessmen and corporate men, which are part of the big business circle. Therefore, they use their market influence to dominate politics at all levels of government. At the same time, monopolies ensure that the market gets competitive. Businesses ensure that products’ quality is always better, so consumers would continue to buy products by dictating which business offers better products. Therefore, monopolies use and see consumers as potential voters for those businessmen willing to influence politics like William A. Clark of Montana in 1899.

Answer 1

Monopoly is a market structure in which only one firm is the sole producer or seller of a product which has no close substitutes. The word monopoly is derived from two Greek words 'Mono" meaning 'one' and 'Poly' meaning to 'sell'. Thus there is only one seller of the product. The monopoly market structure is chracterised by restrictions to entry. The monoploy has a large market power. The profits maximisation level is established at MR=ME and the monopoly firm earns large profits when MR>MR. In monopoly market there is price dicrimination with the customers.

The Monopoly is mainly due to:-

Patents or copyright.

Control over the essential raw material.

Grant of franchise by the goverment.

Economies of scale: Natural Monopoly.

Advertising and Brand loyalties.

The cross elasticity of demand between the product of monopolist and the product of any other producer is zero or impossible. We know that Monopolies want to have sole control of production, distribution, and supply of a good or service. Despite monopolies’ massive expansion and dominion of one market, it creates a market failure in competition. In the lack of competition among many businesses, monopolies are sacrificing quality in products. Monopoly is off course creating inefficieny in the markets. They are gaining at the cost of customers benefit.

Hope you got the answer.

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