MONOPOLY

Monopoly is the condition that arises in an industry where there is only one seller. Since it is the only seller, there are a lot of problems that arise out of it.

This is a very interesting concept in the field of economics. There are great arguments on this topic. There are a number of economists who say that monopoly is not desirable at all. They are not against it, but they that it is problematic to all, and the main people affected are the consumers.

 

Demand curve:

Monopoly is the condition that arises in an industry where there is only one seller. Since it is the only seller, there are a lot of problems that arise out of it. The demand curve is a downward sloping one. This implies that the seller is intending to have more of its product to be sold. For this to happen it has to lower its price.

 

The marginal revenue:

Since the monopolistic company has to lower the prices in order to increase the sales, the marginal revenue it generates would be very less than the actual price of the product itself. This way the marginal revenue curve for these cases would be such that it is well below the demand curve. In case the seller is a price taker, the demand curve would be the same as the marginal revenue curve.

 

The issue of resources:

Due to the restrictions in the industry because of the monopolistic company, there are restrictions in the resources that they have to. In the case of the competitive industry, you can see that there are a number of resources that can be used. This way the production level of the monopolistic company is not that good as it would have been in the case of a competitive industry.

Hence there is a violation of the product mix efficiency in the monopoly. The economy tends to produce the improper mix of products as the marginal rates of substitution are not equal to those of the marginal rates of transformation.

 

The questions:

There are two questions that are seen to arise in unexploited value in the case of monopoly. First one is that if there are any ways by which the government can avoid this unexploited value. The answer to this is in the affirmative.

They can do it by the way of regulations and by the way of antitrust actions. The other one is to know if people have found ways to combat this problem. There is actually a way to capture the value. It can be done by the way of price discrimination.

 

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