MONOPOLY and types

MONOPOLY, types and  Advantages of Monopoly, In economics, a monopoly refers to a market structure where a single company or entity controls the entire supply of a particular good or service, with no close substitutes available to consumers.

In a monopoly market, the sole seller has significant market power and can charge higher prices for their product or service. This is because there are no close substitutes available to consumers, who are therefore forced to pay a higher price if they wish to obtain the product or service.

Monopolies can arise due to various reasons, such as exclusive control over a scarce resource, patents, government regulations, or economies of scale that make it difficult for other firms to enter the market.

Governments often regulate or break up monopolies to prevent them from abusing their market power, as such abuse can lead to higher prices and reduced consumer choice.

What is a monopoly? A monopoly may be defined as a market situation where there is only one producer or supplier of a particular good or service that has no substitute.

The monopolist has the power to influence the price of goods to his favour. The goods sold by a monopolist is normally differentiated.

Monopolistic Competition Type Of Monopoly

Definition: Monopolistic competition is a market situation which combines the fundamental characteristics of both pure monopoly and perfect competition.

This type of market situation exists because neither pure monopoly nor perfect competition exist in isolation and this is a result of the absence of homogeneity and heterogeneity of products sold in both markets.

Causes of Monopoly

  •  Act of Parliament: This is a legal instrument by the government, conferring a special monopoly on some organizations to produce or supply certain goods or services, e.g. public corporations.
  •  Patent Law: This law confers on a firm special privilege to protect its new invention and it tends to scare away other competitors.
  • Level of technology: When a firm develops high level of technology, which makes goods cheaper, this may force other competitors out of production.
  • Effective advertising: The success of a firm in effective advertising may force other competitors out of business.
  • Protection of public interest: Deliberate efforts to protect the public interest by the government may confer certain monopolies on some firms, e.g. Power Holding Companies.

  • Natural cause: Certain areas may enjoy the production or supply of certain goods due to natural endowment, e.g. crude oil in Niger Delta.
  • Merging of producers: The merging of producers will make them stronger to be able to eliminate other competitors in the business.

Advantages of Monopoly
  • Standardization: Standardization, which is the basis of cheaper production, is better practised under a monopoly.

  • Centralized management: There is effective and proper central management under a monopoly.

  • Economies of large-scale production: Economies of large-scale production are possible under a monopoly since it has no competitors.
  • Greater efficiency: There is greater efficiency resulting from an assemblage or pool of specialized managerial skills. It leads to the invention: Monopolists, in an attempt to have full control of the market, do engage in intensive research, leading to inventions.

  • It leads to the invention: Monopolists, in an attempt to have full control of the market, do engage in intensive research,  leading to inventions.

  • Better use of resources: Resources available to a monopolist are utilized to maximize production.

  • Increase in supply: Economies of scale production enjoy by monopoly usually lead to an increase in the supply of the commodity in question.
  • Avoidance of duplication: avoidance of duplication and waste is often associated with perfect competition, especially in the supply of social services.

  • Greater opportunity to expand operations: There is a greater opportunity to expand operations because uncertainty usually associated with j of free competition has been eliminated.

Disadvantages of Monopoly

(1)        Danger of exploitation: Monopoly leads to exploitation of the consumers

(2)        It leads to hoarding: The desire for super normal profit by the monopolist may lead to restriction in output and hoarding

(3)        Decline in efficiency: The absence of competition often leads to a decline in efficiency.

(4)        Over-production and waste: A monopolist may over-produce, lead


(5)        Loss of freedom of choice: There is a complete loss of freedom of choice by consumers.

(6)        Production of substandard goods: Monopoly may lead to inefficiency and production of sub-standard products.

how to Control of Monopoly
  • Provision of substitute products: Monopolists excel because their pr has no substitute. In order to cc them, there should be the provision of a substitute product
  • For example, there should be an alternative power supplier mart from the Power Holding Company.
  • Privatization: Private individuals should be encouraged to take over government corporations and agencies in order to eliminate monopoly from the system.

  • Stoppage of issuance of patent law: The stoppage of such will encourage more people to compete with the inventor so as to promote more inventions in the system.

  • Discouraging merging of firms: Government can make laws which will discourage firms from merging.
  • Reduction of tariffs: When tariffs are reduced, more goods will be imported and this condition will help to reduce the influence of the monopolist, as there would be favourable competition.

  • Price Control: Government may decide to establish a price control mechanism. This enables prices of goods and services to be fixed, thereby reducing the huge profit of the monopolist.

  • High taxes on monopoly profits: High taxes on monopoly products may be imposed, thereby reducing the huge profits made by the monopolistic person(s) or firms.
  1. how to establish enterprises
  2. what is a firm
  3. price equilibrium
  4. scale of preference
  5. concept of economics
  6. economic tools for nation building
  7. budgeting
  8. factors affecting the expansion of industries
  9. mineral resources and the mining industries

demand and supply

    150. ANTHRAX


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