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Advantages and Disadvantages of Monopoly’s.
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| Submitted: Fri Nov 14 2003
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ADVANTAGES AND DISADVANTAGES OF MONOPOLY'S In theory, a monopoly exists when there is only one firm supplying the output of the industry. Advantages Discuss Disadvantages Discuss A monopoly may produce at a lower cost than a competitive industry. This is due to economies of scale, which a monopoly is able to exploit more than a competitive firm, as the monopoly is the sole provider of that good, whereas in a competitive industry the firms share the total output. The ability to set prices at what they desire, in order to gain a larger abnormal profit. This may be the case, however, firms are not simply able to charge a price they deem fit for the product, since it is constrained by its demand curve. A higher price will result in a fall in demand, and that may subsequently lead to a fall in revenue. The existence of long-run abnormal profits can give the incentive to invest more heavily in research...
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