What are the pros and cons of monopolies?


Quick Answer

Monopolies are often better-equipped to serve the public interest and compete internationally. They also have advantages in research and development and economies of scale. The primary problem with a monopoly is that it gives one company control and power of the marketing, which may lead to high customer costs.

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Full Answer

In areas such as law enforcement, utility services and fire and rescue, monopolies allow unified focus on serving the public. Competing organizations offering these services could lead to inconsistent service and response to community needs. Instead, monopolistic setups ensure that a singular system is in place. When a U.S. company competes in the global marketplace as a monopoly, it doesn't have to fend off domestic competitors as well as global ones. A single provider has the abilities to source low costs and operate with economies of scale, which ultimately can lead to better prices or value for end customers. Without competitive pressure, a monopoly also allows a provider to invest in quality research and development.

Another disadvantage of monopolies is that when a company doesn't have competition, it may become sluggish or comfortable in its controlling status. In such situations, the industry in which the company operates becomes stagnant and isn't able to progress in its ability to offer high-quality solutions. There is no competition for pricing, which limits the desire for a company to focus on value pricing.

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