Monopolies: Beneficial or Detrimental to the Economy?

The economy is a pivotal part in our everyday life. Consumers are very much affected by the economy whether we think about it or not. Our economic system, once a pure capitalistic system where the government did not regulate the private sector, has shifted to a mixed economy system. Since the emergence of monopolies, the government has increased their involvement in regulating them. With that said, monopolies still exist today. Although they are frowned upon, there are certain benefits monopolies offers. If these benefits do outweigh the detrimental effects, should the government dismantle a monopolistic firm?

Throughout history, there have been many successful businessmen. One who stands out from the rest is John D. Rockefeller.

Compare to the pure competitor, the monopolist has a longer lifetime and therefore it allows the firm to have more opportunities for research and development from which the firm will reap the benefits. This might bring production cost down, lowering prices, increase production rates and raise the quality of goods (Ulbrich, 1990). The development of technological innovation will overcome technology barriers and allowing the growth of a new era of prosperity, hence fortifying why economy would benefit from monopolies that conducting research and

According to Neill (1992), “It’s time to stop sacrificing the economic wellbeing of the vast majority of Americans and our children’s future in order to underwrite the conspicuous consumption of the very rich” (p. 114). Monopolies are the only ones that can produce certain merchandises in a specific market. With no alternative product to buy, monopolies often brand their products as luxurious items and in return driving prices up. The insights of the monopoly model suggest some of the problems that arise from monopoly power are restricting output, artificially higher prices, lower quality, and persistent profits.

Others added that monopolies produce less output and charge a higher price than a purely competitive environment. The monopolist sets the marginal revenue equal to marginal cost and output is therefore smaller. In monopolies, profits can persist indefinitely, because high barriers to entry prevent new firms from taking part in the market. Since, profits are indefinite; monopolies need not diversify nor improve in their products. Therefore, profits do not serve any useful social purpose in monopoly as they do in pure competition (Ulbrich,