Answer to Question #71514 in Microeconomics for Kelvin Ansong

Question

Using suitable illustrations and examples describe in detail the advantages and disadvantages of the monopoly

Answer 1

Advantages of monopoly
1. Monopoly avoids duplication and hence avoids wastage of resources.
2. A monopoly enjoys economies of scale as it is the only supplier of product or service in the market.
3. Due to the fact that monopolies make lots of profits, it can be used for research and development and to maintain their status as a monopoly.
4. Monopolies may use price discrimination which benefits the economically weaker sections of the society.
5. Monopolies can afford to invest in latest technology and machinery in order to be efficient and to avoid competition.
6. Source of revenue for the government the government gets revenue in form of taxation from monopoly firms.
Disadvantages of monopoly
1. Poor level of service.
2. No consumer sovereignty.
3. Consumers may be charged high prices for low quality of goods and services.
4. Lack of competition may lead to low quality and out dated goods and services.
Reference:
https://www.economicsguide.me/?page_id=1044