Monopolies – Just How Bad Can It Get Without Competition?
A monopoly is a company that does not have any competitors in the industry. There is not a lot of good that can be said about monopolies because the incentive of the benefits cause the monopolies to increase prices and reduce production in order to get more money out of the consumers. As a result, the governments usually make great efforts to break down monopolies and replace them with competitive industries that generate lower prices and more production.
In other situations however, governments create monopolies intentionally. For example, governments emit patents that give them the right of monopoly to their inventors to sell and market their inventions. In a similar way, a lot of local services, such as cable television and picking up of trash, are also monopolies created and placed into effect for the local governments.
Here we will see why society prohibits monopolies in some cases and why they allow it in some cases. But first we will show you how monopolies that seek to maximize the benefits are compared in a non-favorable way with competitive companies because they set higher prices and then produce less of them. We will explain how, in some cases, these problems can be compensated by other factors such as the need to promote innovation and the interesting fact that in some situations it is very irritating to have too many competitors.
Monopolies That Maximize Benefits: Here we are going to get into analyzing cost benefit. Monopolies are not all evil. But they are not deeds of kindness either. The fact that a monopoly is searched after in a specific situation in itself depends on the situation, and if the benefits exceed the costs.
Here we are going to analyze in detail the costs associated with monopolies. Once this has been done, we will go on to seeing the benefits of monopolies. This will allow you to understand the why society prohibits monopolies in some industries while in others they approve them with great enthusiasm.
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