Advantages (Merits/Positive implications) of Monopoly
- There is a possibility of price discrimination where by similar units of a commodity are sold at different prices to different consumers. This enables the low income earners to consume high quality products at lower prices.
- Ability to carry out research. A monopolist earns abnormal profits both in the short run and long run and therefore, it is possible to carryout research so as to improve on the quality of the products.
- Economies of scale are enjoyed by the firm under monopoly. A monopolist has the ability to expand the firm using abnormal profits earned thereby enjoying economies of large scale.
- There is no resource wastage through advertisement. A monopolist does not need to carryout persuasive advertisement because the commodity sold has no close substitute.
- In case of government monopolies, public utilities like roads, hospitals, power supply etc. can easily be controlled and provided to the public fair prices (lower costs).
- Improvement in the welfare of the employees. This is because a monopolist is in position to earn abnormal profits which it can use to improve on the welfare of its workers.
- Growth of infant industries. The infant industries can be able to grow when they are protected by the government from external foreign competition. In this case, the infant industries monopolize the local market and therefore they are in position to get more profits for development purposes.
- There is no duplication of services and goods. For example, if there is a firm producing a certain commodity in an area, there is no need of setting up another firm in the same area as this leads to resource misallocation through duplication.
- Source of government revenue. Abnormal profits made by the monopolist can be taxed by the Government and tax revenue is used to provide social infrastructure like roads, hospitals etc.
- A monopolist is able to use better techniques of production and employ high quality manpower. This is because he has enough money to acquire such technology and man power. This leads to the production of better quality products.
- Creates job opportunities.
CATEGORIES Economics
TAGS Dr. Bbosa Science
