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Analytical Research Paper: Monopoly and the Society - Essay Example

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The paper will analyze monopoly as a microeconomic issue. The society today has been commercialized and people engage in varied activities for economic gains. Economics is a body of knowledge that involves a systematic study of production and consumption of goods and services. …
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Analytical Research Paper: Monopoly and the Society
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?The society today has been highly commercialized and people engage in varied activities for economic gains. Economics is a body of knowledge that involves a systematic study of production and consumption of goods and services. The discipline economics also studies the transfer of wealth or economic possessions between regions, people and organizations. There are two main branches of economics which are microeconomics and microeconomics. Macroeconomics is the study of the whole economy of a region and deals with unemployment, inflation national income and consumption among others. On the other hand, microeconomics means, “the study of economic behavior of individual units of an economy such as a person, household, firm and industry” (Business Dictionary 2012). It analyses and understands the factors that influence a person’s economic choices. Having understood the terms we can now narrow down to the analysis of a particular microeconomic issue. The paper will analyze monopoly as a microeconomic issue. According to InvestorWords.com (2012), monopoly is a state in which a particular company is in control of all, or almost all, the market of a specific product or service. It occurs due to various issues that prevent other companies from entering and competing fairly in the market. Such barriers for instance, may include huge economies of scale and government regulations and procedures (InvestorWords.com, 2012). Huge economy of scale is a situation where a particular company has a gigantic capital base that allows it to engage in enormous amount of production, hence lowering the cost of production. When the cost of production is lowered, the company will maximize its profits. For instance, Coca-Cola Company is an international company that has largely thrived due to a strong capital base. Government regulations also contribute to the establishment and sustenance business monopolies. Authorities through the law may restrict other companies from entering the market. Monopoly makes companies to dominate the market and to enjoy lack of competition. It is almost obvious that the goods and services of the companies that enjoy monopoly are consumed because of the absence of an alternative to the customers. We are in a business environment and globalization has even made business a more complex undertaking. This is because it has come about with the expansion of the global market due to technological advancements that has caused high interconnectivity. In the wake of international trade, there is immense global competition in the provision of goods and services. Different companies and organizations are required to compete fairly and within the legal framework provided. This development has threatened monopolies and most of them thrive mainly due to government regulations that cushion them. There are some very vital and basic commodities like water and electricity that cannot be left for several companies lest they exploit the consumers. In such a case monopoly becomes a vital tool by governments to ensure provision of quality and affordable goods and services to their citizens. What are the benefits of monopoly to the society? Monopolies benefit from a sure market that enables them to develop their capital base. This will fuel such companies to realize wealth and profit maximization. As such, the companies will benefit from economies of scale that will result to reduced cost of production. Devon (2011) documents that reduced production cost is beneficial both to the companies and customers. When the cost of production is reduced, the cost of commodities will also reduce, and this is highly beneficial to the consumers. A reduction in prices increases their purchasing power, and this in turn promotes their social development and standards of living. Monopolies are beneficial to the particular companies since it increases their profits. When profits increase, such companies are able to invest heavily in the economy. This will spur the economic growth of a particular country or region where they exist. According to Devon (2011), another benefit of monopoly is that, companies are well endowed with resources and are able to invest in research and development to produce better goods and services that are beneficial to the consumers. On the other hand, monopolies have problems associated with them. A company that enjoys a monopoly does not have competitors and may exploit the customers. According to Tutor2u.net (2012), “a monopoly supplier will produce at a lower output and charge a higher price than a competitive industry.” This is because the consumers do not have a choice and are compelled to use their products. The fact that there is no competition also leads to the exploitation of employees. In a monopoly environment, employees always suffer unfair treatment in companies and organizations (Devon 2011). The employees have no option but to accept low wages and to be subjected to poor working conditions. Employers who enjoy monopoly are aware that there is nowhere the employees can seek alternative employment since they are the sole employers in their respective fields. Though the paper has discussed only a few, the problems of market monopoly are myriad, and need to be curbed. One of the ways of curbing the problems of monopolies is by regulating them by the relevant authorities. According to Tutor2u.net (2012), monopolies exploit the public by producing low quality goods while overcharging the customers and such governments have to regulate some of them. For instance, a government may set price limits for goods and services produced by the monopolies to help curb exorbitant prices. The quality of goods produced by the companies can also be measured against the set standards to ensure that the consumers get value for their money. Employees being at risk of exploitation should be protected by government legislations to ensure that they work in favorable working environments and get reasonable pay for their services. Monopoly involves control of the market of a particular product or service by a business entity. It has its benefits like improved investments by a company, and that is beneficial to the economic development of a country. It also has disadvantages like, employees and customers exploitation among others. Relevant authorities should endeavor to regulate monopolies to ensure that they give quality and affordable goods and services to the public as well as encourage their beneficial outputs. References Business Dictionary.com. (2012). Microeconomics Definition. Webfinnance Inc. http://www.businessdictionary.com/definition/microeconomics.html Devon Willis. (2011). Advantages and Disadvantages of Monopolies. Ehow.com. Retrieved From http://www.ehow.com/info_8433706_advantages-disadvantages-monopolies.html InvestorWords.com, (2012). Monopoly; Definition. WebFinance Retrieved From http://www.investorwords.com/3112/monopoly.html Tutor2u.net. (2012). Potential Benefits from Monopoly. Retrieved From. http://tutor2u.net/economics/content/topics/monopoly/benefits_of_monopoly.htm Read More
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