Monopoly Case Study

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ABSTRACT Monopoly can be understood in very simple term meaning a market which has only one seller and there are no close substitutes for that seller’s product or service. Sometimes the term “monopoly” is technically referred to the market itself but usually it is referred to the seller who has created monopoly in the market. The single seller is otherwise called as “monopolist”. Monopoly to be really effective in the market should practically have no substitutes for the product or service at all and also there should be no threat of the entry of a competitor into the market. This gives the monopolist a perfect control over the pricing of the product or service. Monopolies are a result of having barriers to entry that inhibit other company’s…show more content…
Huge profits in turn leads to higher investment in research and development that gives way to more innovation and better products and services. • Revenue to the government: monopolies can be a great source of revenue to the government in the form of taxes and also generate export revenue through exporting their product overseas.eg; Microsoft • Price stability: most of the time in a monopoly market, the price of the product remains stable as there is only one seller fixing the price. Where in other forms of market the prices could be elastic due to presence of competition. In monopoly there is little or no competition. • Effective and efficient service: the service provided by the monopolist companies would be efficient and effective as they would be sole provider of that particular product or service, as such extra care and attention will be paid in providing better service to the consumers. • Induces innovation: the supernormal profits that these monopolies earn would motivate them to invest more in research and development for further innovations which in turn leads to production of improved products and…show more content…
As such the seller is at the liberty to quote the price he feels right. Most of the times the seller charges higher price for the product as he knows his products are produced exclusively by him. • Consumer exploitation: as there is very little or no completion in a monopolist market, consumers tends to get exploited in terms of higher price, substandard or low quality goods etc. since the consumers have no option but to buy the products offered by the seller. • Customer dissatisfaction: higher price for the product, low quality goods or services, lack of choice among products leaves the customers dissatisfied. • Price discrimination: monopoly firms sometimes tend to practice price discrimination by charging different prices to different customers. • Inferior goods and services: the monopoly firms may end up producing inferior quality goods and services as he very well knows he is the sole producer of the product and the customers would buy it no matter whether the quality is low or substandard. • Restricted choice for the customers: monopoly does not give customers choice of goods and services as such there is restricted options for them to choose the
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