Monopolies Essay

Economic systems have many variations with one of them being the free market economy. In the free market, there is no government intervention so firms can operate without having to comply with regulations or pay tax (they would have to pay an extremely minimal amount of tax for defense ex.). This in theory is a breeding ground for competition but in reality economies very close to free markets face the challenge of monopolies. Monopolies control the whole market and set the price they want and don’t take the price like other companies. They have complete control over the market so they can have supernormal profits by raising the price over the market equilibrium if it is easier and more profitable for them. In this essay I will be talking about

This doesn’t affect them, as there is no competition consumers can go to so they are either forced to either not buy the good or service or pay an extremely high price for it. This is why monopolies are bad for the economy. They take advantage of the vulnerability of consumers and exploit the very system that was designed for competition. Speaking of competition, it is the essence of what free market is supposed to be; businesses fighting to grow within a vast market filled with companies like themselves. Perfect competition involves unlimited demand, many buyers and sellers, businesses being price takers and not price makers and everyone having perfect technology to produce their goods or supplying their services. Competition is the best way for the public good. The prices are low as companies try to distinguish themselves from the rest of the market and therefore lowering prices to stand out which is good for the consumer. Everyone is awarded for hard work, as there is no monopoly to have an unfair advantage in the market, which is good for businesses. When there is perfect competition everyone is treated fairly. But as it is the case with many theories, it doesn’t work well in real life because of

A great example of this is the London Underground. The London Underground was a project, which required billions of pounds with years of research and development. It was beyond the private sector’s ability to do a project of this magnitude. So the government decided to build it, as it would help Londoners commute. They built the London Underground over the years and now have a monopoly over London’s underground transport infrastructure. This kind of monopoly, which is called a ‘public monopoly’, or a ‘government monopoly’ is often good in democracies as the government keeps the prices down in order to appeal to voter and to get re-elected. This shows that not all monopolies are bad and if the intention is not profit, it can do real good.

In conclusion, we can see that monopolies are usually bad for the consumer as they increase prices, limit choice and have influence over them but a government monopoly is good because it provides vital services for low prices. We can also see that competition is better than monopolies as they increases choice, lowers prices and gives consumer sovereignty which allows the consumer to have control over the