Advantages And Disadvantages Of Monopoly:

The usual arguments for and against monopoly are presented in this section.

The Advantages of Monopoly

(i) No risk of over - production: As a sole producer, the firm knows the quantity that consumers of its product will demand and therefore will not produce in excess of demand.

(ii) Efficient and full use of resources: The monopoly firm can use its equipments and machines to their full capacity to producing a large quantity of its product based on the known market. The perfectly competitive firm is not sure of its market share and therefore its resources may be underutilized.

(iii) Monopoly helps to reduce price: Monopoly is associated with large scale production and low average cost; therefore, the firm can afford to sell at a lower price than the perfectly competitive firm.

(iv) Inventions and innovations: The monopolist is encouraged to invest in research and development (R and D) efforts because of the barriers to entry. There is a tendency for the firm to introduce a cheaper technique, sell at a lower price or improve the quality of its products for the benefit of the consumers.