Arguments in favour of monoploy, Managerial Economics

Assignment Help:

ARGUMENTS FOR MONOPOLIES

Although monopolies are usually hated mainly because their practice of consumer exploitation, there are some aspects of monopolies which are favourable.  The following arguments can be put forward in favour of monopoles:

  1. Economies of Scale

As it has the whole market to itself, the monopolistic firm will grow to large size and exploit economies of large scale production.  Hence its product is likely to be of higher quantity than product of a competitive firm that has less changes of expanding and lowering of the long run average cost (LRAC) of the firm. The price charged by the monopolistic firm may not be as high as is usually assumed to be the case.

314_monooly.png

When the MC and AC curves are MC1 and AC1, the price charged is P1 and the output is q1. When the cost curves the lower at MC2 and AC2 a lower price P2 charged and the level of output is higher.

2.  No wastage of resources

 As there is no competition from other firms, the monopolistic firm does not waste resources in product differentiation and advertising in an effort to capture consumers from rival firms.

3.  Price stability

Since the monopolist is price maker, prices under a monopoly tend to be more stable than in competition where they are bound to change due to changes in supply and demand beyond the control of the individual firm.

4.  Research

A monopolistic firm is in a better financial position to carryout research and improve its products than a competitive firm.


Related Discussions:- Arguments in favour of monoploy

Elasticity of supply of the pens, A firm supplied 3000 pens at the rate of ...

A firm supplied 3000 pens at the rate of Rs 10. Next month, due to a rise of in the price to 22 rs per pen the supply of the firm increases to 5000 pens. Find the elasticity of sup

Equilibrium in a two commodity market, Equilibrium in a two commodity marke...

Equilibrium in a two commodity market Let us consider a two-commodity market model in which the two commodities are related to each other.  Let us assume the functions for bot

Costs of unemploment and inflation, COSTS OF UNEMPLOMENT AND INFLATION   ...

COSTS OF UNEMPLOMENT AND INFLATION   In  an  economy  both  unemployment  and  inflation  have  adverse effects  and policy makers  formulate policy instruments to contain both

Can identity economics explain some patterns , Can identity economics expla...

Can identity economics explain some patterns observed in the Australian economy

Marginal cost, A firm in a perfectly competitive market invents a new situa...

A firm in a perfectly competitive market invents a new situation of production that lowers its marginal costs.  What happens to its output? What happens to the price it charges?

The contributor of economics, who are the contributors in economics and wha...

who are the contributors in economics and what they contribute in economics

State the method of price elasticity of demand, Price elasticity of demand ...

Price elasticity of demand The price elasticity of demand is defined as the degree of sensitiveness or responsiveness of demand for a commodity to the changes in its price. Mo

Explain price elasticity and total revenue, Q. Explain Price elasticity and...

Q. Explain Price elasticity and total revenue? Given the relationship between price elasticity and marginal revenue of demand in Eq. II, the decision-makers can simply know whe

Historical development of money, The Historical development of money F...

The Historical development of money For the early forms of money, the intrinsic value of the commodities provided the basis for general acceptability :  For instance, corn, s

Determine that the laws of economics still work today, (i) Do the laws of e...

(i) Do the laws of economics still work today? (use the case discussed in class to answer this question or any other examples) (ii) Provide examples of three factors that can sh

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd