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Analysis of Advantages and Disadvantages of Monopoly Through Own Professional Experience
A monopoly is an exclusive possession of the supply of or trade in a commodity or service. After being offered the position of Junior Executive and thinking about the pros and cons of each side, I have concluded to accept the role of Junior Executive at Mega Avocado Corporation. Three main points that support my claim are the data from our 2008 and 2009 production, our general knowledge about what a monopoly is and how it works, and the power of the patent.
My strongest point about why joining a monopoly is the best decision is the data and research from our production in 2008 and 2009. In 2008 our data reflected our place in a competitive market, while our 2009 data depicts our place in a monopolistic market. Our costs per avocado were lower in 2009, making our sales increase. The 2009 data makes my point valid because it is ethical for our producers and our consumers. Most people think that a monopoly causes prices to be higher for consumers; however, our data shows explicitly that we did not price gauge and that our prices were fair. According to this data, our profits were higher, being a monopoly versus being in a competitive market. Therefore, joining MAC as a Junior Executive is ethical and fair.
Although this data from 2008 and 2009 highly supports monopolistic markets, the common thread with monopolies is that prices increase for consumers due to price-fixing and price gauging as the profit increases as well. “Monopolies face inelastic demand and so can increase prices-giving consumers no alternative” (economicshelp.org). Many believe this action to be unethical because it creates an unfair market place with no competition, so consumers must pay high prices. However, in our MAC monopoly, our prices are fair and even below the competitive market prices the year before.
“Monopolies are firms that dominate the market” (economicshelp.org). Many people, without clarification, automatically assume that monopolies are bad because they hurt consumers. However, they can lower average costs, which, in theory, help the consumers. Think about natural monopolies. The long-term investment can gain lower long-run average costs. Having one primary firm produce the good or service limits the amount of infrastructure and investment. This process makes it more efficient for a monopoly to exist. The Sherman Anti-Trust Acts make monopolies legal and able to run their firms without using their power to gain advantages. As long as companies follow these laws, then there is no reason for a company not to be allowed to gain control and have a competitive advantage.
There are a few disadvantages of a monopoly that come into play. In some instances, it creates a decline in consumer surplus because fewer consumers can purchase the goods at the inflated prices. All of these advantages and disadvantages depend on the market type. For instance, if factors such as a contestable market, ownership, and government regulation take hold, it depends on the structure and type.
My final point that brings my statement the most strength is the power of the patent. “A patent is a government authority or license conferring a right or a title, for a set period, especially the sole right to exclude others from making, using, or selling an invention”. The patent in a monopoly provides incentives for firms to become innovative. The development of new technology and knowledge betters our society. This innovation causes high profits allowing companies to invest and fund further projects and funnel some of the profits back into the community.
While some see monopolies as a positive use for innovation, others see it as a lack of innovation. People believe that there is a lack of motivation to create new products because there is no competition to beat out. Since many are not able to compete with a monopoly, the motive for innovation is business and market demands, not ingenuity.
In modern American societies, monopolies are generally considered to be harmful because they cause markets to fall. The main concern is that monopolistic firms can charge any price they want for a good or service because they know that people need their items. However, there are situations in which the positive advantages outweigh the negative disadvantage. This Junior Executive position at Mega Avocado Corporation is one of them. This monopoly helps the consumer and the producer. The prices are low, and the profits are up. What more could be wanted? I can prove that my role as a Junior Executive is ethical and fair through production data in 2008 and 2009, the basic understanding of the pros and cons of a monopoly, and finally, the power of the patent and innovation.
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