Question

Explain monopoly discuss major disadvantages of monopoly

Answer 1

A monopoly exists when there is only one producer in the market with a lot of consumers. Monopolist is a price maker since there is only one producer so there is lack of competition in market therefore the monopolist sets the price for its product. Public utility companies tend to be monopolists.

The major disadvantages of monopoly are:

1. lack of economic competition slows down the economy.

2. lack of substitutes so consumer cannot switch products easily.

3. unfair price setting by the monopolist