It helps low-income people and helps businesses increase profits by selling more products when they offer discounts. Monopolies can continue to make money in the long run as they adjust their capabilities to changes in demand by modernizing their plant size and earn positive profits by preventing other firms from entering the market.Ī monopolist follows price discrimination. Fewer and fewer consumers want products to be more expensive. Conversely, a monopolist can raise prices by limiting output.Įven though a monopoly is the sole producer of a product, that doesn’t mean they can charge whatever price they want. If a competitor appears, the monopolist can take over the entire market by lowering the price. Monopoly enterprises increase their market share by controlling output/price. The government grants patents to manufacturers (or companies) who invent products-original and necessary, for example, the invention of an essential medicine or machine. Business activities require licenses that limit the degree of competition. It is a strategic move.Īrtificial barriers that create a monopoly are the human-made barriers, framed in terms of rules, regulations, and conditions. For example, a pharmacist or medical center in a small town can maintain its long-term monopoly by offering specials. Individuals or companies can also initiate price wars-deliberately selling goods and services below the cost of production to drive out competitors. Likewise, an individual or company with modern technology, innovation, and research can drive away competitors by offering goods and services at lower production costs. A doctor who has inherited a great deal of wealth can easily use money to buy better resources than other colleagues. The natural way includes the possession of key resources, economies of scale and development strategies. ![]() Monopolies can occur in various ways, both natural and man-made. If you’re a single doctor in the suburbs, you can have all your patients come to you. He looks at every player, how they are going to contribute to win the last game.Ī monopoly is a single seller of a product or service with no competitors. The selector is watching a football match to select the player for the last match.
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