Advantages Disadvantages of Monopolies

A monopoly is where one individual firm is the sole supplier or controls the largest part of a particular market. One advantage of a monopoly is when large capital is needed only one firm can produce the goods. Companies with a monopoly can have better resources to spend on research and development, bringing new products and technologies to the market quickly and efficiently. Another possible .

A monopoly is a situation in which an entity, either an individual or an industry or organization, is the sole supplier of a particular good or service. As such, this supplier has no competition from other suppliers and is able to control the market value of the commodity. Some monopolies are government-enforced or controlled, while others form naturally or through company mergers. Monopolies sanctioned by the government are called legal monopolies. These are considered coercive monopolies, meaning that other companies are forbidden by law to compete against them. Governments also maintain some control over monopolies through competition laws, which prevent monopolies from engaging in unscrupulous or anti-competitive practices. While monopolies are generally viewed in a negative light, they have both advantages and disadvantages, depending on the type of monopoly, the supplier's economic strategies, market demand and other factors.Some monopolies offer the advantage of decreased prices as a result of economies of scale. For example, a company that is already established as a monopoly and sells a large amount of its commodity often develops cost-effective measures that restrict other companies from entering the market because they cannot afford to offer the commodity at a competitive price. Other monopolies earn large profits and use a portion of the funds to conduct research that results in an improved product at a lower cost. Government monopolies are frequently created to protect the public or to ensure that they are provided with a necessary service. For example, the Canadian government controls the healthcare market in order to provide all of its citizens with basic medical care. Government-granted monopolies, which include patents, trademarks and copyrights, offer an incentive to companies or individuals to develop new products and continuously strive to improve existing products.Monopolies also result in a number of disadvantages. One of these is the consumer's inability to comparison shop. Consumers must either purchase the product or service from the monopoly or do without it. Some monopolies choose to maximize profits by raising prices and reducing production. Others sacrifice the quality of a product by purchasing the cheapest materials available to produce it in order to increase profits. A common practice among some monopolies is price discrimination, in which the monopolist charges some segments of the population more than others for the same product or service, based on a higher need or a wealthier consumer base. Monopolies may also encourage unfair or illegal practices, such as dumping, price fixing, exclusive dealing or tying, which involves bundling a desirable product with an undesirable product and requiring the consumer to purchase both together.The negative or positive effects of a monopoly on a consumer are based on many factors, including government restrictions, market conditions, the ethics of the monopolist and the sales strategies used by the monopoly, in addition to many others.