Arguments in favour of monoploy, Managerial Economics

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.

Posted Date: 11/28/2012 5:25:35 AM | Location : United States







Related Discussions:- Arguments in favour of monoploy, Assignment Help, Ask Question on Arguments in favour of monoploy, Get Answer, Expert's Help, Arguments in favour of monoploy Discussions

Write discussion on Arguments in favour of monoploy
Your posts are moderated
Related Questions
Q. Show the Properties of isoquants? Isoquants slope downwards to the right:   It means that, in order to keep output constant; when amount of one factor is increased then the

Appropriate Management of Sales: Demand forecasts are made area wise and after that sales targets for various areas are set in view of that. This helps the calculation of sales pe

Q. What do you mean by Oligopoly? Type of market condition that is most appropriate in the today's economy, is oligopoly. It's characterised by mutual interdependence among a f

list all profession which generate personal income

Is a “perfectly competitive market” an efficient mechanism for the allocation of scarce resources? When it is, explain why. When it is not, document reasons for either inefficient

Demand management policies These policies are intended to increase aggregate demand and, therefore the equilibrium level of national income.  They are sometimes called fiscal a

what is the full concept of discounting principles of managerial economics ?

Limits on the process of bank deposit creation On the demand side , there may be a lack of demand for loans, or at least of borrowers who are sufficiently credit worthy .

Managerial Economics helps create utility for the Society.

Kinds of Bargaining arrangements Basically there are three kinds of bargaining arrangements, namely: Open Shop: In an open shop a union represents its members, but doe