Question

You need to offer an opinion around what is good or bad about a monopoly?

You need to offer an opinion around what is good or bad about a monopoly?

Homework Answers

Answer #1

Good about the monopoly in the market. = natural monopoly or the monopoly that is created by economies of scale in the market is good for the economy, here, a single monopoly firm in the market having enough economies of scale can provide goods for the whole makret at a lower rate than two or more smaller firms will do, example of this is electricity utility company and railways.

Bad = they are inefficient both allocative and productive, a monopoly firm can produce more and reduce the price of the goods but they will continue to produce at the point where the marginal cost and the marginal revenue in the market are same, that lead to productiuve inefficency and as the price and the marginal cost are not the same it leads to allocative inefficiency.

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