ECONOMICS RESEARCH ON MONOPOLY

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Topic selectionI felt MONOPOLY is best topic to research on because in today’s era Monopoly has increased its market widely. Let’s take some example like Our electricity supply from one agency, i.e., State Electricity board; we travel by railway i.e. owned and run by the Government of India.All these examples are of Monopoly. This is the situation of market where single(mono) firm controls(poly) the production of commodity is called monopoly. According to Koutsoyiannis, ”Monopoly is a market situation in which there is a single seller ,there are no close substitutes for

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commodity it produces, there are barriers to entry.” INTRODUCTION

Monopoly is a market situation in which there is a single seller, there are no close substitutes for commodity it produces, there are barriers to entry. A form of the market in which the only seller of a commodity has full control over price is Pure Monopoly.

FEATURES

(1) One seller and large no. of buyers

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(2) Monopoly is also an industry(3) Restrictions on the entry of the

new firms(4) No close substitutes(5) Price maker(6) Price discrimination

CAUSES OF MONOPOLY POWER

(1) Control over raw material (2) Patents(3) Technical barriers(4) Government policy(5) Capital size(6) Historical or entry lag

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EFFECT OF PRICE DISCRIMINATION

(1) To the poor(2) Public utility services(3) Full utilization resources(4) Harmful effects:(5) No proper use of factors of

production(6) Less production

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BENEFITS(1)Monopoly avoids duplication and hence wastage of resources.(2)A monopoly enjoys economics of scale as it is the only supplier of product or service in the market. The benefits can be passed on to the consumers.(3)Due to the fact that monopolies make lot of profits, it can be used for research and development and to maintain their status as a monopoly.

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(4) Monopolies may use price discrimination which benefits the economically weaker sections of the society. For example, Indian railways provide discounts to students travelling through its network.(5)Monopolies can afford to invest in latest technology and machinery in order to be efficient and to avoid competition.

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NEGATIVE ASPECTS(1)Poor level of service.(2)No consumer sovereignty.(3)Consumers may be charged high

prices for low quality of goods and services.

(4)Lack of competition may lead to low quality and out dated goods and services.

(5)Monopoly is that seller is the price maker which gives seller undue advantage of charging exorbitant or unfair price for the product

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leading to exploitation of consumers as they have no option but to buy it from seller as there is no competitor of the seller in monopoly market.

(6)Monopoly is that firm may resort to discrimination pricing that is charging different prices from different customers which will lead to dissatisfaction among consumers as same product will be priced differently for different markets or consumers; hence there is no transparency in case of monopoly.

(7)In case of monopoly in the absence of any competition there is tendency of the seller to be complacent which in turn leads to seller selling low quality products

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and providing poor customer service as customer has no choice because there are no substitutes due to lack of competition.

As one can see from the above that monopoly has both advantages and disadvantages, however majority of the governments as well as consumers all over the world don’t prefer pure monopoly market structure because most of the times it leads to exploitation of consumers by monopolist.

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SUGGESTIONSBy lowering the output and raising the price of his product, a monopolist can exploit the society. Consequently, government in each country keeps the activities of the monopolist well under-control. Monopoly can be controlled and regulated in the following manner:-

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(1)Anti-Monopoly Legislation:-Monopoly power can be restricted by enacting anti-monopoly legislations. Such legislative measures prevent monopoly firms from coming into existence.

(2)Maintenance of fair competition:-Monopoly power comes into being when it is not opposed by any real or potential competition.

(3)Price and Output Control Measures:-Monopoly is also criticized because under it, more price is charged and less output is produced than under perfect competition.

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(4)Purchasers’ Association:-Setting up for cosumers’ forums has been advocated to enhance the bargaining capacity of the purchasers.

(5)Publicity:-Adverse propaganda will create fear in the mind of the monopolist and he will desist from practicing objectionable and improper methods.

(6)Through Subsidies and Taxes:-Government these days impose heavy restrictions on the exploitative tendencies of the monopolist.

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THANKYOU

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