Advantages and Disadvantages of Monopoly

In the jungle there is a lion who is called the king of the jungle because lion has the power to hunt any animal, in the same way when it comes to products there is a monopoly. It is a form of market structure where there is one seller and there are many buyers for the product which in turn give seller opportunity to decide the price, in simple words in case of monopoly it is the seller who is the king or price maker and price of product is not decided by equilibrium between demand and supply for the product. Given below are the various advantages and disadvantages of monopoly –

Advantages of Monopoly

  1. The first and foremost advantage of monopoly is that since there is one single seller in the market it leads to economics of scale because all supply is concentrated at one place and that leads to big scale production which in turn leads to lower cost per unit for the seller and if the seller passes it to the consumer that consumer will also benefit from the lower price of product being available for consumption.
  2. Another advantage of monopoly is that since there is no competition sellers do not resort to unfair promotional tactics like their product is better than others or claiming incorrect features in their product or giving discounts after increasing the price of product and so on.
  3. Since there are abnormal profits in case of monopolies seller can invest that amount in research and development of product so that customers can get better a quality product at reduced price leading to enhanced consumer surplus and satisfaction.

Disadvantages of Monopoly

  1. The biggest disadvantage of monopoly is that seller is the price maker which gives seller undue advantage of charging exorbitant or unfair price for the product 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.
  2. Another disadvantage of 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.
  3. In case of monopolies 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 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 this market structure because most of the times it leads to exploitation of consumers by monopolist.

0 comments… add one

Leave a Comment


Related pages


report on opening a demat accountadvantages and disadvantages of bankingprepaid expense meaningdifference between freight and cartagedifference between drawer and drawee bankwhat are the advantages of a traditional economymarginal cost in cost accountingautocratic supervisioncrr slrdurable and nondurable goods examplesrevenue received in advance journal entrydisadvantages of direct investmentexamples of current liabilities in accountingadvantages and disadvantages of money market mutual fundsdeflation cycleconglomerate growthnon redeemable preference sharessystematic risk and unsystematic risk pdfforward exchange rate contractcore product augmented productcompare shopping portalseffect of advertisement on monopolistic competitiondefinition monopolistic competitionadvantages of debenturedifferentiate between assets and liabilitieswhat is indirect quotationadvantage and disadvantage of globalizationdisadvantages of marketing conceptmerits of globalisationmonopolistic characteristicsadvantages and disadvantages of mixed economyunitarily elasticcash reserve ratio formulaexamples of physical assetsdifference between freight and cartageadvantages and disadvantages of lifo and fifohow do we complete a horizontal and vertical analysisrent receivable journal entryfull form of gstdisadvantages of hire purchaseactivity based budgeting disadvantagesdisadvantages of m&acapital formation meaningexample of upsellingsocial media merits and demeritsbenefits of cashless societycompetitive advantages and disadvantagesprofit skimmingdisadvantage of command economyadvantages and disadvantages mixed economywhat is a decentralised organisational structuremeaning consigneedifference between capitalist economy and socialist economyfive types of elasticity of demandtds full formwhat does ebit mean in financewhat are current liabilities examplesconglomerate structurecheque and draft differenceeffect of advertisement on monopolistic competitionfull form of slr in bankingbrs statementfii meaningtypes of factoring servicesfdi and fii meaningunearned revenue journal entriesadvantages of lifo inventory methodmonopolistic competition is a market situation in whichadvantages and disadvantages of vertical integrationadvantages and disadvantages of invoice discountinglocational arbitragemulti segment marketing strategybalance sheet vertical analysisfdi and fii definitionforms of factoringa study of non operating expenses of proprietary concernppt on fund flow statementenvironmental pollution advantages and disadvantagesadvantages of planned economyunclaimed dividend definitiondifferent types of liquidity ratiossubstitution and income effect exampleshow to do intraday tradingasset revaluation reserve journal entries