Question

pretend that you are an editorialist, and write an editorial considering whether or not you believe that monopolies should be illegal and defend your argument using pertinent economic theory. Please use Microeconomics theory and answer the entire qustion.

Answer 1

Monopolies are sole producers of a particular product who do not have to face market competition . Monopolies are born mainly due to economies of scale , cost advantages or any other benefit the production process over other firms . In my opinion monopolies should be made illegal .

Monopolies help producers to generate super normal profits which can lead to income inequality in the economy . Monopoly firms do not have the incetive to spend on betterment of quality of their product since they do not face stiff competition . Monopoly price is always higher than perfect competition which is a burden on consumer's pocket . Monopoly price control measures can be implemented but that such strict vigilance may not be cost effective for the government . There are stong entry barriers in the monopoly market which prevent new investors from entering in the market . Also monopoly firms do not pay high wages to labourers since the labour market is competitive in nature . In monopoly pricing there is always loss of welfare and it generates deas weight loss in the economy .