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
State about Production theory Production theory assists in determining the size of firm and level of production. It clarifies the relationship between marginal and average cost

isoquant and its properties

Arc Elasticity Is the average elasticity between two given points on the curve, i.e. Because of the negative relationship between price and quantity demanded, pr

Using the discounting principle calculate the present value of an annuity of five years at Rs. 500 payments made at the end of each of the next five years at 10% interest. stion..

Q. Discovery of new technical know-how? Growth of Technical Know-how: Expansion of an industry may result in the discovery of new technical know-how. As a result of this firm


plot the demand schedule and draw the demand curve for the data given for marijuana in the case above

What are the essential points to determine in monopoly? Points essential to determine in monopoly: a. The importance of monopoly, where a particular monopolist is the merely

discuss baumols dynamic models

Marginal Revenue Marginal revenue is the additional revenue an organization receives resulting from the sale of one more item of output. Marginal revenue is calculated by takin