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Student name: Nguyen Tuan Anh Student ID number: 21001326

Student name: Nguyen Tran Hai Bang Student ID number: WSU21000260
Student name: Tran Phuoc Minh Hieu Student ID number: 22002465
Student name: Ngo Gia Khiem Student ID number: 21000519
Student name: Nguyen Le Minh Y Student ID number: WSU21000137

UNIT AND TUTORIAL DETAILS

Unit name: Principle of Economic Unit number: PE-T222WSB-6

Thursday 8 a.m – 11.15
Tutorial/Lecture: Nguyen Thi Hoang Anh Class day and time: a.m
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ASSIGNMENT DETAILS

Title: Monopoly are always bad ?

Length: 1694 words Due date: 1/7/2022 Date submitted: 1/7/2022
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ABSTRACT:
Monopoly has always appeared with negative images in the media and newspapers in recent

years. This research paper will analyze and give more positive views of Monopoly in the market.

In general, there are three main views of Monopoly. The first is that monopolies change

economies of scale. Second, being a monopoly allows a business to compete internationally.

Ultimately, being a monopoly provides a high level of return for shareholders and the local

community. In each of the main points above, there are supporting ideas of evidence and

examples related to national and

international companies.

In summary, the final opinion of this paper is that monopolies have both positive and

opposing sides, and in a detailed comparison of the positives of monopolies

outweigh the negatives.

INTRODUCTION:

A monopoly is when one business holds a dominant position within an industry or a sector to the

exclusion of all other serious competitors. The phrase dominant might sound bad in some

situations, but then the benefits of Monopoly are indisputable. Economies of scale, that is, a

single firm can reduce its long-term average expenses in a sector with high fixed costs by using

economies of scale. Besides, firms with monopoly power may be the most efficient and dynamic

by outperforming their competitors, and businesses might acquire monopoly power. Besides,

contrary to the good things that Monopoly has created, there are still wrong sides that Monopoly

brings. Higher prices than in competitive markets, monopolies may raise prices because of

inelastic demand, leaving consumers with no other options. Furthermore, a decline in consumer

surplus makes consumers pay higher fees, and fewer consumers can afford to buy. This also
leads to allocative inefficiency because the price exceeds the marginal cost. The Investopedia

Team once stated that "When free-market competition would be economically inefficient, the

price consumers should be regulated, or high risk and high entry costs prevent initial investment

in a crucial sector, monopolies over a particular good, market or aspect of production are thought

to be beneficial or economically wise". To prove the hypothesis, we will analyze about three

positive aspects of monopolies: Monopoly changes the economies of scale, Monopoly can help

businesses focus more on their product quality and technological innovation and they funnel a

high level of profits back to shareholders and local communities. Besides, there are also two

negative sides, which is that the customer is the one who suffers the most because of the

exclusivity of the product and increased prices are inconvenient for consumers.

DRAWBACKS OF MONOPOLY:

There are two compelling reasons why Monopoly leads to many disadvantages to economics and

society. Firstly, the customer is the one who suffers the most because of the exclusivity of the

product. However, the Monopoly in the market makes it look like it is not too hard to purchase.

Everyone admits that price is one of the most critical factors in buying decisions. According to

Rusith, the single supplier of all market output is a monopolist corporation. The monopolist may

thus demand a more excellent price than in a market with competition. Monopolist businesses

can raise prices without concern about the competition (since no match is available in a

monopoly market). And since the customers have to pay more for their stuff, when they go to the

supermarket and see that the item they are looking for is more expensive than expected, they will

have to find a cheaper alternative. It is a pity that the monopoly market restricts customers from

changing their choices.

Because there is no accessible product alternative, consumers will be unsatisfied. Even if it meets

quality standards and is within the customer's intended price range, there is only one option on

the market. Monopolistic businesses would strive to produce at the highest level possible to

maintain the average product cost as low as possible due to the economies of scale that come

with massive corporations. This output occasionally could not be enough to satisfy the entire

market. Due to the lack of available goods on the market, consumers will be unsatisfied (Rusith,

2022). It sounds like customers are being forced into a passive position, and they have to change

their shopping habits because of this. It is almost impossible for those who cannot afford to buy

the product from the monopoly company to get it with other products. At the same time,

customers who can afford to shop cannot buy products easily because of the shortage of products

in the market. They may have to buy at a higher price or spend a lot of time looking for another

seller. According to Rusith, monopolistic businesses will not be inspired to innovate or enhance

their products due to a lack of competition. Since the experience would remain the same quality

over time, this won't be good for the customers. It can be seen that customers suffer a lot in this

market. They had a hard time buying, and the product they received was not much improved.

Customers may have had to spend a lot of money to receive a product that is not worth the

money. In short, many people are adversely affected by the Monopoly in the market, but the

people who suffer the most are still customers.

Next, a monopoly can lead increase prices that are inconvenient for consumers. The fact that

products become monopolistic and increase in price causes quite a negative effect on consumers.

According to the article "How Does a Monopoly Affect Business and Consumers?" written in

2019 by Nicole Manuel, a customer cannot find a reasonable substitute in terms of price and
quality when the item is monopolized. So there will be problems from a customer's point of view

because exclusive products will not have to compete in quality and price, so a consequence of

not very high quality but with a high price is standard in complete items.

Lack of competition in the market will allow a business not to be too interested in racing to

improve its product or offering a fair price for its development because it has a monopoly on the

product in the market they have the full right to decide the quality and the cost of the item

without having to worry about too many issues like when competing in the market. Moreover,

not only because they have to buy an item at a less reasonable price compared to the quality, but

some customers even have to give up the need to use the item when the exclusive item is

available too expensive for their standard of living. Therefore, to limit this adverse situation,

governments need to manage and regulate the prices of goods in a reasonable way, even those

that are monopolistic. And of course, the governments of other countries also see this and

promulgate all kinds of constitutions regulating the price of commodities; specifically, the

government of Vietnam can see the types of shapes that handle the prices of commodities. About

prices on the Vietnamese government's homepage of the Price Management Department,

especially the latest circulars in the article "Circular No. 25/2019/TT-BTC amending and

supplementing several articles of Circular 323 /2016/TT-BTC" was posted in 2019 by the Price

Management Department. It can be seen that the increase in the price of monopoly products

affects quite a lot, negatively to consumers. And to overcome this, the government has issued

laws on price regulation, which are pretty effective so far, tight and efficient.

 
ADVANTAGES OF MONOPOLY:

Instead of causing many disadvantages, monopolies bring many advantages to the economy of

enterprises. Firstly, monopolies, especially those operating in natural monopolies, can benefit

from economies of scale.

It benefits society and customers in addition to monopolies. For instance, governments in most

international locations bestow monopolistic power to one or two firms to continue serving the

entire market if there are significant technological economies of scale (where larger businesses

will be able to produce at lower costs), such as in electricity companies (electricity, gas,

landline). The temporary monopoly power granted by patents and copyrights, which enable

companies to defray the high costs of R&D, further encourages businesses to invest significant

sums of money in developing new products, particularly in the pharmaceutical and information

technology sectors. In this approach, society gains from recent technological advancements and

potential savings from economies of scale. Additionally, just below a perfect level, a few sellers

of identical products or a monopolist (who offers a good or service to the entire market) make

more money than many smaller businesses. These "monopoly" or "monopoly" revenues can be

utilized to fund R&D initiatives that small enterprises cannot fund. Additionally, this might

enable customers to purchase things at fair prices. For instance, it makes no sense if several small

businesses compete to provide tap water because they will duplicate infrastructure and

investment. Having just one business, or a monopoly, is more effective when there is extensive

infrastructure. Consequently, monopolies bring economic benefits to both consumers and the

monopolist. With the expansion of economies of scale, oligopolies bring companies lower
average costs and higher profits. Consumers alone will have more reasonable prices, especially

in industries such as electricity, water, and oil,...

Moreover, Monopolies can help businesses focus more on product quality and technological

innovation. 

The monopolistic power of patent applications motivates companies to invest in knowledge and

innovation that can contribute to the betterment. One of the advantages of monopolies is that

they can protect authors by patenting copyright. In the medical field, drug manufacturers would

not have been capable of making such significant investments in drug research without patent

and monopoly power. Additionally, monopolies generate profits, which can be employed to

finance developments that culminate in more technological advancements and dynamic

efficiency. For instance, major tech monopolies like Google and Apple have invested

substantially in innovative technologies. According to Apple (2021), Apple developed its $5

billion Manufacturing Technology Foundation in 2017 to encourage innovation and industry

diversification. The fund's investments have sparked ground-breaking innovations in industries

as diverse as 5G infrastructure, sustainable material research, and laser technology. Moreover,

Apple - one of the only technology companies - has contributed to the development of the USA

in general and the technology industry in particular. Apple repeatedly stated that it would speed

up its US investments, with money to invest more than $430 billion and create 20,000 new jobs

worldwide in five years. Over the period under consideration, Apple's investments in the US

have greatly surpassed the company's initial $350 billion five-year objectives established in

2018. To boost American innovation and stimulate economic development throughout all 50

states, Apple is increasing its commitment level by 20% over the next five years. It includes

billions of dollars for 5G innovation across nine US states and the manufacturing of next-
generation silicon. As a result, it encourages businesses to adopt their ideas and product

attributes, increasing worker productivity and societal spirituality. Focusing on the quality of the

outcomes and the development in the technological fields will create more advantages for the

monopolies.

Another benefit of Monopoly is they funnel a high level of profits back to shareholders and local

communities.

Monopolistic advantages bring huge economic benefits to businesses and local communities. The

article "8 Pros and Cons of Monopolies" written in 2015 by Brandon Gaile argues that

monopolies provide a high level of return for shareholders and local communities. Without

competition, the high returns that a monopolist can achieve provide the basis for future capital

investments. This can ultimately improve standards, reduce consumer costs, and create new

products for future use. This can be a huge advantage for everyone in rapidly evolving

technology industries. The Monopoly of the product allows the businesses and local

communities to control the total amount of product sold on the market, the selling price and the

profit earned from that particular product or service. In general, monopolies have benefits such

as helping many companies gain a great advantage in the market. According to the article

"Advantages and disadvantages of monopolies", written in 2020 by Tejvan Pettinger, businesses

and local communities can charge higher prices and make more profits than competitive markets.

Businesses can benefit from economies of scale - by scaling up and having lower average costs -

which is important for industries with high fixed costs and a scope of expertise. Firms in a

monopoly position can enjoy a large share of the benefits of economies of scale, i.e. expansion in

economies of scale, resulting in lower costs relative to the common ground, which will make it

possible for the local consumer community to use "exclusive" items at a lower price. In addition,
the local government also benefits from taxing local companies that occupy a monopoly position.

In summary, it can be seen that monopolies bring many great benefits to businesses and local

communities, such as a strong accumulation of assets for businesses, development budgets, etc.

development for that local government, and the benefit of owning a proprietary item at a lower

cost to local consumers.

PAPER’S CONCLUSION:  

In conclusion, even though Monopoly produces less output at higher prices and has negative

implications on consumer surplus and social welfare, the existence of monopolies is inevitable as

long as firms seek profit maximization, increased market share, and ultimately market

dominance. In a free-market economy, the chances of supernormal profits will eventually

encourage other firms to attempt to break into a monopolistic market. The threat of competition

or even a financial threat of a takeover will force a monopoly to become highly economically

efficient. Although Monopoly has some disadvantages, as our group mentioned above, we

believe its advantages outweigh the drawbacks in various ways.

REFERENCES:

 Apple commits $430 billion in US investments over five years. Apple Newsroom.
(2021). Retrieved 27 June 2022, from https://www.apple.com/newsroom/2021/04/apple-
commits-430-billion-in-us-investments-over-five-years/.
 Economics Help. retrieved 27 June 2022, from
https://www.economicshelp.org/blog/265/economics/are-monopolies-always-bad/.
 Monopolies: Choosing between economies of scale and “too big to fail.” (2020, August
28). Deccan Herald. https://www.deccanherald.com/opinion/panorama/monopolies-
choosing-between-economies-of-scale-and-too-big-to-fail-879002.html
 Manuel, N. (2019). How Does a Monopoly Affect Business and Consumers?. Chron.
Retrieved 26 June 2022, from https://smallbusiness.chron.com/monopoly-affect-business-
consumers-70033.html.
 ‌Pettinger, T. (2020). Advantages and disadvantages of monopolies - Economics Help.
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https://www.economicshelp.org/blog/265/economics/are-monopolies-always-bad/.
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natural-monopoly-tough-to-self-regulate.
 Rusith. (2022, March 30). Monopoly Market: Advantages (Pros) and Disadvantages
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