Question

Please describe and elaborate two instances in which monopoly formation is legal.

Answer 1

Monopoly is a market where existence of single seller in the market and there is no substitute for the monopoly market the defect of the monopoly market are as follows

• Price is greater than MC of the product
• The out produced by the firm lees then optimum size of level of the output

The monopoly formation is legal many countries because of following reasons.

• For the welfare of the people, for example, the electricity generating corporation owned by the governments which are monopoly firm to give electricity to the all the income groups in the country.
• In order to protect national interest example defense sector of any country manufacturing units are owned by monopoly firms of the country.

The above facts show that government regulation or monopoly firm in the economy operates not profit motives but welfare motives of the people.