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The Benefits Of Monopolies

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The monopoly system that businesses obtain, through longevity in the market as well as government funding have proven once again to be detrimental to consumers. In the discussion of equity versus efficiency, monopolies have an advantage in which they are able to set their marginal price beyond their marginal revenue, which in turn exceeds marginal cost. This is a distinct advantage compared to markets which contain perfect competition. This dilemma causes grief in the customer markets, due to the lack of options the demand is rarely affected by price changes since there are no close substitutes to turn to. The article outlines the current customer response to the highly monopolized government-run business, the US postal service.
In Cocktail
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For example, the government has drastically given the
US postal service subsidies and advantages, such as mailboxes to be used by only their business.
This increases the steep curve for any other possible competitor to possibly join in on the market, which demonstrates the monopoly that they control.
Secondly, due in part to the direct government interference with the market, the topic of equity can also be brought into question. The economic definition of equity is defined as the ability for the economy to use resources and distribute them fairly between the members of society. The following quote explains the inefficiency created by a monopoly and government intervened market: “When a government intervenes to change price or quantity to an amount other than the efficient free market amount, economists say that the government is distorting the market.” (Cocktail Party Economics, 142) Most likely, when a government sets up a monopoly, as seen in the article – the price consumers pay drastically increases. With a limited amount of options available for the same service, the operators of the monopoly will act out of greedy intention and will be passed onto consumers. This in turn directly affects the fairness
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(Cocktail
Party Economics, 120) This leads to a loss in allocative efficiency, since resources are no longer being used at a price in which consumers want to pay, as its placed about the competitive market equilibrium. Adding onto this, monopolies are not only increasing the price of product to cause an inefficiency, but also directly manipulating the supply. “The major sin – from society’s perspective – committed by the monopolist is not that it overcharges for its products, but that it under produces in order to maximize its profits.” (Cocktail Party Economics, 120). This again relates to allocative efficiency, since resources are not being used to their fullest ability.
In conclusion, government intervention, or a monopolistic approach to business almost always causes a market failure due to a deadweight loss and inefficiency, while disregarding equity. This could easily be seen in a real-life example, outlined by the operations conducted by the US postal service. By charging unrealistic amounts for their services, while abusing their subsidies they have run their business to maximize profits while disregarding efficiency and
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