Homework Lance
Economics Discussion
Institution Affiliation
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A monopoly refers to an enterprise that is the only of a certain good or service. A monopoly is normally free to set any price without intervention from the government. A monopoly sets a price that generates the largest profit (Moaze& Johnson 2016).
Monopolies have both positive and negative impacts on the economy. The positive impacts of monopolies on the economy include the following: avoids duplication of products and hence wastage of resources is minimized .Duplicate and fake products are normally a major problem in most countries and hence monopolies help in curbing this problem.
The other advantage of monopolies in the economy is the fact that monopolies make use of price discrimination normally helps the weaker sections of the society. Monopolies are also of revenue to the government since the government gets its revenues in form of tax from the monopoly firms.
Conversely, monopolies also have negatives impacts on the economy since they reduce the aggregate economic welfare since they reduce the income of the society through charging high prices. A monopoly has the ability of using it market power and hence paying its suppliers lower prices and this inhibits the growth of such suppliers .Monopolies do not face any competition and hence have less incentives to work on innovation and come up with better products.
In my opinion I think monopolies are bad for the economy since they supply inferior goods to the customers in most cases despite charging high prices. Monopolies also lead to inflation in the economy since they are free to set any price they want. This in turn raises the costs to consumers hence causing cost push inflation (Beach, 2007).
References
Beach, C. F. (2007). A treatise on the law of monopolies and industrial trusts, as administered in England and in the United States of America. Clark, N.J: Lawbook Exchange.
Moazed, A., & Johnson, N. (2016). Modern monopolies: What it takes to dominate the 21st-century economy.
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