Hello dear friends, greetings to you all and hope you all doing ok . Today I will like talk about MONOPOLY , firstly I would give a definition of the term, causes , advantage and disadvantages and how Monopoly can be controlled.
Monopoly: This is a market situation were there only exist one supplier or producer of a commodity which has no close substitution. In cameroon sectors that fall under this sector includes electricity and water .
Causes of Monopoly power: Monopoly power refers to the ability of the Monopolies to enjoy abnormal profit both in the short and long run , these depends on his ability to restrict entry and non existence of close substitute, some causes of Monopoly power includes
1_Natural MONOPOLY: These may result to the concentration of a raw material in a particular region for example gold ,oil, gas, an as such this region enjoys Monopoly in the supply of this raw material
2_ legal Monopoly: This is a legal instrument use by the government to grant Monopoly to some organization to produce and supply certain good or services for example pupplic cooperations like eneo
3_ Technical Monopoly: This is Monopoly arising
from economy of scales that is large firms producing large volume of output may be benefiting economy of scales so that new firms producing on small scale will not be able to compite and will close down .
As we are from seeing the causes of Monopoly I will also want to talk on the advantages of it as will be seen below.
1_Advoidance of duplication and waste of resources: lack of competition lead to the efficient use of resources for example if many companies had to supply water to cameroon towns there will be many pipes lines water poin and tangs in thesame street belonging to different companies this duplication leads to waste of resources
2_ There enjoy economic of scale:Monopoly produce in a large scale and as such enjoy economic of scale like marketing economy and financial economy
3_There ensure that prices are stable: Monopoly brings about stable prices and output because they can predict market demand
4_ The provide essential good and services to citizen:State Monopoly provide essential goods to the citizens at subsidised prices to enhance the well fair of the citizens.
Dispute these advantages of Monopoly there are also some disadvantages as will be seen below
1_ Exploitation of consumers: It's exploit consumers by charging high prices for good and services
2_Limit consumers choice: Since they produce standardlised good , they turned to limit consumers freedom of choice
3_Inefficiency: Since there restrict entry there is no competition this lead to inefficiency and production of poor quality goods
4_They creat artificial scarcity: That is there reduce output in other to increase price .
Done with the advantages and disadvantages I will also want to talk about how to control Monopoly. Since Monopolies act against public interest it is necessary to control the activities of Monopoly through the following ways
1_ Anti Monopoly law: The government may discourage Monopoly by making legal laws prohibiting the practice of Monopoly such laws will give the court the right to dissolve any existing Monopoly into a number of Independence companies
2_Nationalisation: When the Monopoly exploit consumers especially natural Monopoly the government takes over such Enterprise and run then as public cooperations
3_Taxing the excess profit: To discourage Monopoly from exploiting the consumer, the excess profit of the Monopoly are taxed.
I will end here by say Monopoly in a business economy most always fine it place it can not be avoided as in some sector it is necessary.