Friday 6 May 2011

What are the benefits for the consumer of a monopoly market?

There really
aren't any, except in certain rare circumstances.

Monopolies are great for
business owners; monopolies restrict production and raise prices, leading
to much higher profits. But both of those things are extremely bad for
consumers, and in fact it turns out that the harm to consumers is almost always larger than the
benefit to business owners, to the point where we could literally just take some money from
consumers and hand it to business owners, then establish a competitive market, and everyone
would be better off than they were under the monopoly. (Not that we necessarily
should, but we could, in
theory.)

Competitive markets are provably optimal for consumers in the long
run, as they produce the most efficient amount of goods and sell them at the most efficient
price.

There are basically only two circumstances where monopolies can be
beneficial for consumers.

The first is if there is an economy of
scale.
If the good is actually produced more efficiently in larger quantities, then a

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