Disadvantages Of An Economic Monopoly


Disadvantages of an Economics Monopoly

It is not unusual coming across a company wishing to beat or even get rid of its competitors. This can be achieved by getting hold of contending companies or by obtaining most of market share. However, this can happen only if the company can successfully monopolize the market. In effect it means consumers would have no choice other than this company for a particular product or even services. Allowing an industry or a marketing company to have monopoly is not healthy for consumers.

Background: Definition

A monopoly is said to occur when we have only one manufacturing or marketing company to depend upon for buying a particular product or services. This is possible when there is only one company qualified enough to produce that product or it has a total control over supply of a product. You would know only Apple has rights for the extensively used iPhone, yet it is competing against other companies producing Smartphone.

Below are some disadvantages of monopoly:

1st Disadvantages of Monopoly – Lower quality at higher prices

Companies having monopoly over a product are bound to take advantage of the fact that the consumers have no other choice but to buy that company’s product. So, the company dictates its prices and terms of business. This not only harms the consumers but also the quality of the product produced by the company. Since there is no competitor, the company hardly makes any effort to improve the quality of their product. It just continues to maintain the lowest acceptable level of safety and quality.

2nd Disadvantages of Monopoly – Consumer bullying

Monopolistic environs, particularly in case of consumable products adversely affect the consumers, having no choice but to buy the one and only product available in the market.  For instance, means of public transportation in a city will be thoroughly analyzed and examined if the government were to raise its fairs. The consumers may not be prepared to pay higher fares, but they are compulsorily made to pay enhanced fares for attending to their jobs. The United States government is particularly careful in ensuring that customers are not subjected to buy under compulsion. In fact, the US has imposed efficient monopoly policies to regulate the prices of goods and services, including utility companies that need to have transparency in their dealings.

3rd Disadvantages of Monopoly – Workers Livelihood

Workers employed by a company having monopolistic business are also adversely affected. Such companies are generally in complete charge of their manufacturing costs, including workers’ wages. That is because there is no other company which could utilize their special skills. As a result they get caught working for the same company. Having realized their status, the monopoly company takes advantage of the circumstances and offers them little or no incentives to enhance their skills. Though employees may form unions to get some level of fairness from the company, it is not really effective in case of unskilled employees.


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