10th September 2018

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What is so bad about a monopoly?

When firms have such power, they charge prices that are higher than can be justified based upon the costs of production, prices that are higher than they would be if the market was more competitive. The bottom line is that when companies have a monopoly, prices are too high and production is too low.

In respect to this, how do monopolies affect consumers and small businesses?

Though monopolies may reduce prices temporarily to drive out the competition, they often raise them after all of their competitors have failed. Because small businesses have a harder time surviving than larger ones, smaller businesses sometimes merge to increase their resources.

Why monopolies are bad for consumers?

Congress enacted it in 1890 when monopolies were trusts. A group of companies would form a trust to fix prices low enough to drive competitors out of business. Once they had a monopoly on the market, they would raise prices to regain their profit.

Are monopolies good for the consumer?

There are ways consumers benefit from monopolies. Monopolies are usually large dominant firms which allows them to achieve economies of scale as compare to small firms. Therefore, monopolies are able to produce at low costs which subsequently could be lower prices for consumers.
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