Effect of monopolies on the economy essay

Default monopolies may arise when there is lack of sufficient knowledge or interest on a particular subject[3]. A natural monopoly arises when technology for producing a product enables one firm to meet the entire market demand at a lower price than two or more firms could.

A major preposition that makes monopoly undesirable is that monopoly leads to a failure in the market mechanism because the monopoly price is generally higher than both the marginal and average costs.

Haas, Citizens of The United States value competition in their market system. An oligopoly arises when a small number of firms have relatively large market shares. A pharmaceutical company that develops an original drug can patent it for several years during which it enjoys exclusive production rights.

A classical example is the United States Postal Service that has continuously offered US citizens poor quality services at the expense of taxpayers. This may necessitate some form of government intervention for example by market liberalization in order scale down the monopoly dominance.

Certain circumstances do lead to creation of near monopolies or oligopolies. Exclusive ownership of a key resource may lead to creation of a monopoly. Monopolies have resulted in great innovations and immense growth in several sectors of the economy while in others they have been detrimental for example through collapse of small enterprises or delivery of poor quality services.

Microsoft offers an outstanding example on this front whereby the greatest proportion of computers run on their software thus enhancing compatibility.

New York, Oxford University Press. Such a patent offers the producer monopoly status where the producer can charge higher prices and earn greater profits. A firm may end up being a small monopoly by having an upper hand when it comes to accessing knowledge on a particular trade.

How do monopolies arise? Moreover only big monopolies with significant market power have the capacity to carry out research and development on their products.

A company or a group of affiliated companies is considered to have a dominant position in a particular market if it exerts a decisive influence over the general conditions of trade in that market or can restrict access to that market for other businesses.

Amtrak enjoys a monopoly status in the passenger rail system. A classical case is exemplified by the control of the computer hardware, market by International Business Machines IBM for nearly forty years. Their services are crucial in providing enabling environments for the citizens to explore and achieve their goals in life.

This is largely due to the benefits arising from legal monopolies created by the Patent and copyrights law. This is a law that governs intellectual property. Monopolies may in certain instances offer inferior services or products. A monopolist may manage to maintain lower marginal costs due to economies of scale and the advantages of division of labor.

Monopolies have been in existence throughout business history and several corporations have achieved complete dominance over a wide array of industries.

Are monopolies beneficial or detrimental to the US economy? Rise in Monopolies, n. Donald,D suggests that monopolization can be advantageous to the consumers by enabling cheaper production due to economies of scale. Monopolies arising from merges and restructuring can operate more efficiently and thus provide better quality services to the citizens.

The benefits arising from economies of scale may be eroded due to X inefficiencies[4]. It refers to the production losses incurred by monopolies arising from economies of scale and lack of incentives to be innovative.

Essay Example: Effects of Monopolies in the Usa Economy

The nearly twenty year monopoly enjoyed by Microsoft in manufacturing of its computer software has not only ensured harmony and uniformity in computer software but also facilitated accessibility of computers by the greater population. Such barriers could either be natural or legal constraints that protect a firm from competitors.A monopoly is a business that is the only provider of a good or service, giving it a tremendous competitive advantage over any other company that tries to provide a similar product or service.

In spite of the undesirable economic effect of a monopoly in general, a monopoly may in certain circumstances generate substantial economies of scale, which can be passed on to society in a lower price. The small firms of perfect competition are not large enough to bring about the economies of scale.

The effects of monopolies on the U. S. Economy What is a monopoly? The concept of a monopoly is largely misunderstood and the mere mention of the term evokes lots of emotions that make clear judgment almost impossible.

The standard economic and social case for or against monopolistic businesses is no longer straightforward. Monopolies are both beneficial and detrimental to the economy and a cost benefit analysis needs to be done to ascertain the role played by individual monopolies in any particular market.

This demands a precise definition of what actually constitutes a market because in almost every industry, the market is highly segmented into different products.

The effects of monopolies on the U.S. Economy What is a monopoly? The concept of a monopoly is largely misunderstood and the mere mention of the term evokes lots of emotions that make clear judgment almost impossible.

The standard economic and social case for or against monopolistic businesses is no longer straightforward. Markets are the heart and soul of a capitalist or free market economy which is based on the notion of competition.

Varying degrees of competition ultimately lead to different market structures with different outcomes to the market.

Effect of monopolies on the economy essay
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