Here is a compilation of essays on ‘Monopoly’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Monopoly’ especially written for school and college students.
Essay on Monopoly
Essay Contents:
- Essay on the Introduction to Monopoly
- Essay on the Features of Monopoly
- Essay on the Growth of Monopoly
- Essay on the Check on Monopolies
- Essay on Monopoly and Its Forms
- Essay on the Advantages of Monopolies
- Essay on the Disadvantages of Monopolies
Essay # 1. Introduction to Monopoly:
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The market, form of monopoly is the opposite extreme from that perfect competition. It exists whenever an industry is in the hands of single of producer. In the case of perfect competition there are so many individual producers that no one of them has any power over the market and an; one firm can increase or diminish its production without affecting the market price. A monopoly, on the other hand, has power to influence the market price. By reducing its output, it can force the price up, and by increasing its output it can force the price down.
The word monopoly is made of two words; MONO +POLY. Here ‘Mono’ means one and ‘Poly’ implies the seller, thereby the literal meaning of the word Monopoly is one seller or one producer. Thus, pure monopoly refers to that form of market organisation wherein there is single firm (or producer) producing a commodity for which there are no good or close substitutes.
According to Watson, “A monopolist is the only producer of a product that has no close substitutes.” Changes in prices and outputs of other goods sold in the economy must leave the monopolist unaffected. Conversely, changes in the monopolist’s price and output must leave the other producers of the economy unaffected.
Essay # 2. Features of Monopoly:
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(i) Single Producer:
There is a single firm producing the commodity in the market.
(ii) No Close Substitutes:
For the monopoly to exist single producer is the necessary condition but not a sufficient one. It is also essential that there should be no close substitute of the commodity in the market. This second condition would be even more difficult to fulfil than the first, since there are few things for which there is no substitute.
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For instance, Usha are produced by a single firm alone but there are close substitutes of Usha fans that are available in the market in the form of Relifans, Khaitan Ashoka, Crompton, etc. Hence, though the firm producing Usha fans is single yet it cannot be termed a monopoly firm.
It is, therefore, essential for a monopoly to exist that there should be no close substitutes available in the market. This condition can be stated in other words as that the cross elasticity of demand for the output of the firm with respect to the price of every firm’s product is zero.
(iii) Barriers to the Entry:
The entry into the industry is completely barred or made impossible. If new firms are admitted into the industry, monopoly itself breaks down. This ban on entry may be legal, natural or institutional but it must essentially be there.
(iv) Firm and Industry:
Since in monopoly there is single firm producing the commodity, hence the difference between firm and industry vanishes automatically.
(v) Downward Sloping AR and MR Curves:
The monopoly firm is like an industry, and faces a downward sloping demand curve for its product; thus, it has to lower its price in order to sell more. For, it is this nature of demand curve that determines the nature of average and marginal revenue curves. Under perfect competition, we know, average revenue and marginal revenue curves coincide in a horizontal line. But that is not so under monopoly.
With a monopoly, however, the average revenue curve, which is the same as the market demand curve, is downward sloping. Furthermore, the marginal revenue curve does not coincide with the average revenue curve rather, it remains below it. Thus, for a monopolist firm both AR and MR curve are downward sloping and MR remains below AR as shown in the diagram.
The downward sloping shape of the AR curve clearly indicates that a monopoly firm is a price-maker.
(vi) Price-Discrimination is Possible:
Under the conditions of monopoly price-discrimination is possible. It implies that a monopolist can sell its product at different prices to different customers.
In short, monopoly depends basically on two factors:
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(i) Absences of close substitutes; and
(ii) Restriction on competition.
Essay # 3. Growth of Monopoly:
Monopoly exists in every society, and there are no effective checks for controlling monopoly.
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But monopoly grows and develops only under certain favourable circumstances, which may briefly be discussed as under:
1. Control over Raw Material:
When monopoly gets control over the raw material it is bound to grow and develop. This control can be that the nature has helped in the process or that the industrialist himself has manipulated in getting the control. But availability of raw material with exclusive control is very much favorable for the growth of monopoly.
2. Legal Backing by the Government:
The monopoly can flourish with legal backing. If the government is decided and determined to crush a monopoly, it is bound to face many complications and might not even survive. On the other hand, if the government supports, it will grow.
The government can give backing by accepting its patent trademarks, by punishing those who violate them and by providing some financial and other facilities. The least it can do it that it shall not allow interference in the affairs of the monopoly.
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3. Demand for the Product:
If the product is of high quality and the society has appreciated that, then the monopoly will definitely grow. But on the other hand if the product is of sub-standard quality and the society is accepting that simply because it has no other alternative, then monopoly situation is not likely to last for long. As soon as the society finds an alternative, it will immediately go in for that and the monopoly will then receive a serious setback.
4. Behaviour of Monopoly:
How the monopoly behaves, is another factor which decides about its growth. The society is bound to be influenced by the behaviour of the management, its personnel and salesman. In case monopoly behaviour is upto the expectations of the society, it will have social support, which will help in its growth. As soon as that support is lost, the monopoly will go on the path of retardation.
5. Healthy Combinations:
Monopolies come into existence when some firms combine together. These combinations can be healthy as well as unhealthy, fair or underhand means. When combinations arise out of fair and healthy means, it can be presumed that the monopoly was growing and developing. But when these combinations are based on unfair means, not only that the progress will be slow, but these will not grow.
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6. Control over Essential Services:
Then monopoly control over essential services goes a long way in deciding whether monopoly would grow or not. In case monopoly exercises control over such essential services as water, power, transport etc. then the monopoly may quickly grow. If these services are not under their influence and control, the pace of growth might be very slow.
7. Satisfaction of the Staff:
Each monopoly would employ several hundred people, if not more. The people will fall under various categories. Broadly speaking there will be skilled, unskilled and semi-skilled people. Most of them might have conflicting interests. The greatest problem is to keep them satisfied. Growth of monopoly is linked with the satisfaction of the employees. Only satisfied employees can give better production and help manufacturing and controlling the market.
8. Providing Varieties:
The people always want a change. A commodity which a society once accepts will remain acceptable only for sometime and not for long. If monopoly can keep the customers satisfied by providing varieties, then well and good; otherwise the people will themselves try to search for variety, giving setback to the monopoly.
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9. Flow of Finances:
Each monopoly will need finances to grow. If the money is forthcoming quickly then the credit of monopoly in the market will increase and no project will ever receive any serious setback. On the other hand if the monopoly is short of finances, one day or the other it will receive set back.
10. Scope of the Market:
What is the scope of the market in respect of the product, which it is producing. If the market is wide and there is scope for expansion then there is every chance to believe that the monopoly will grow. On the other hand, if the scope is limited, then it can be seen that one day rival will come and may wipe out the existing monopolists, by providing a touch competition. Moreover, if the scope of the market is limited, then at some stage a saturation point will reach, beyond which there will be expansion. The people may search for the alternatives.
Essay # 4. Check on Monopolies:
There are certain checks which always operate in the market. No monopoly, however strong its network may be, can escape the influence of those checks.
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These are:
1. Existence of Substitutes:
Monopoly can control only few commodities, for which a market has been created. Every consumer will like that the commodity should continue to remain good, quality satisfactory, supply regular and prices reasonable. But once the monopoly tries to misbehave the consumer will try to find substitute for the commodity. The monopoly also knows that for every commodity there is a substitute and as such will not like that the taste of the consumer should in any way change.
2. Danger of State Intervention:
The other check on the monopoly is that in case the monopoly does not behave properly the State may intervene. It may pass such laws, which will force the monopoly to properly behave. Such behaviour will be more restrictive than the voluntary behaviour and the monopoly may be obliged to behave in a manner which it does not like.
3. Rise of Rivals:
Monopoly is that it is always afraid that in case it does not keep pace with the wishes of the people, then it is just possible that some rival party may come in the market and successfully and easily capture that throwing them out of the market. Such a rival can have share in the profits and even control the whole market.
4. Nature of Product:
Demand for the product can be both rigid as well as elastic. If monopoly is producing a product, for which demand is elastic, it will have to give the society many concessions. On the other hand if the demand is rigid, then it can behave to some extent, in the way it likes. So the nature of product also decides about the behaviour of the monopoly.
5. Price Consideration:
The monopoly cannot arbitrarily fix price. It will have to take paying capacity of the customers into consideration. It will therefore, fix only such price which is considered reasonable by the society and not by the monopolist.
6. Fear of Boycott:
Monopoly behaviour is also checked by the fear that the society might boycott the product, if the prices are fixed very high. The monopoly always should realise that customer can expect exploitation only to a limited extent. If the prices are kept high the consumers can well organise themselves and the industry might alienate the sympathies of the society. It is a very big check on the monopoly.
7. Taste of the People:
Monopoly may be interested to produce such articles which can bring them heavy profits, but at the same time, it will have to keep the taste of the people and society into consideration. The monopoly will be forced to produce only what is required by the society no matter in that their margin, of profit is high or low.
Essay # 5. Monopoly and Its Forms:
Monopoly situations and conditions are prevailing in all economies, either in one form or the other. Though some of the nations are trying to check monopolies, yet the fact remains that these are rapidly increasing and not being checked, because the system has its own advantages.
Monopoly is a situation in which a group of persons is in a position to end competition in a particular commodity and control sale and supply of that commodity. That group is also in a position to influence its price. An extreme monopoly situation arises when a firm or group of closely connected and interested persons only begins to produce a particular commodity.
In the words of Stonier and Hague, “The pure monopoly, as we may call it, will occur when a producer is so powerful that he is always able to take the whole of the consumer’s income whatever, be the level of his output.” Similarly Liftwich has said that, “Pure monopoly is a market situation in which a single from sells a product for which there are no good substitutes.”
Is Perfect Monopoly Possible?:
Perfect monopoly situation is not possible in the world. For production, distribution and pricing there must be some sort of competition, though in some cases it may be very tough, while in others only normal. It will be only an ideal situation in which competition can be completely eliminated.
Form of Monopoly:
A monopoly situation provide the monopoliser with an advantage of fixing the price, or produce quality of goods or distribute them in the way he likes and as such even person or business house is in a position to have monopoly. This monopoly is created either by an individual with its own vast resources, or by combining together and thus pooling their resources or groups of industries coming together so that mutual competition is avoided and monopoly is created.
The monopolies may be classified as:
(a) Natural Monopoly;
(b) Legal Monopoly;
(c) Social Monopoly and
(d) Voluntary Monopoly.
(a) Natural Monopoly:
This is monopoly in which individual has and nature has more role to play. In it nature blesses the nation with bounties in a particular commodity and that is available in that country, which can control that in the way that likes. Arab nations have oil monopolies and they can control the world economy in so far as oil and oil products are concerned.
(b) Legal Monopoly:
In some cases, a product does not exist or if that exists that is comparatively less or unknown. An organisation or an individual works hard, carries out research, spends his life and is in a position to produce and market that. He feels that his product is being well received and does not wish that any individual or organisation should take advantage of his labour.
He gets his trade mark and formula registered with the Government by paying fixed fees. After that has been accepted no one else can either use formula or trade mark which then becomes his absolute monopoly. It is called- legal monopoly.
(c) Social Monopoly:
In every society there are certain civic amenities and facilities to be provided to the citizens. Therefore, an organisation may be allowed to provide those facilities e.g. in Delhi, electricity is supplied by Delhi Electric Supply Undertakings or water is supplied by Delhi Water and Sewerage Department and so on. This type of organisation which is solely responsible for the supply of a particular civic amenity is stated to be enjoying a social monopoly in that commodity.
(d) Voluntary Monopoly:
It is also known as combination. In it some of the producers dealing in the same commodity come nearer and closer to each and combine in one form or the other so as to avoid competition. There is no external force or compulsions to join or to combine, that is why it is called voluntary monopoly. Such a monopoly can be in the form of Trusts or Cartels.
This voluntary monopoly can be either vertical or horizontal. A vertical combination is also known as integration. A horizontal combination can be in the form of pools, holding company and complete merger.
Monopolies are not very much appreciated these days because it is felt that socially these are more harmful than useful to the society. Moreover, it is felt that monopolists exploit the situation to the greater disadvantage of the common man, resulting in his ruthless exploitation, and leaving him with, little option or choice.
Essay # 6. Advantages of Monopolies:
Some of the advantages of the monopolies are as follows:
1. Economies of Large Scale Production:
Monopolies can only successfully function, only when there is large scale production. In such a situation obviously advantages of scale economies accrue to the organisation or the individual. These include economies in buying, selling and savings in transportation and overhead charges.
Then it becomes possible to employ qualified people at good salaries and drain in competent people from other organisations. Similarly we also find that it becomes easy to have an up to research laboratories and purchase latest machinery to modernise the industry. All these advantages of large scale economy make it possible to lower down the cost of production and sell the commodities at cheap rates in the market.
2. Elimination of Competition:
Usually there is cut throat competition in the market. But when there is monopoly, there is no competition and a lot of money is saved, which can be advantageous to the society. The individual or the group can lower the price of the goods produced can sell them at cheap rates.
3. Essential in Public Utilities:
Every society needs public utility services. Some of the services are really very costly and require huge capital, which one firm cannot spend. It is in the interest of the society itself that monopolies be created e.g., electric supply, milk supply or water supply etc. Any competition in these services is bound to do more harm than good to the society. In such services only monopolies can serve the purpose.
4. Depression can be Faced:
When there are depressions most of the small and uneconomical industries go out of the market. Only the monopolies, which have vast sound financial resources cannot effectively survive and face the situation. Monopolies can afford to suffer losses, which fall in prices bring with them. In the face of losses, they can continue to produce and try to control the market.
5. Ability to Face Competition:
Today there is keen competition, both in the local, national and international markets. It is usually difficult to face the competition, with the result that many small scale firms go out of the market, after suffering heavy losses. But when monopolies arise, obviously the monopolists try their best to face all competitions. Thus monopolies have always proved useful and effective in facing international competitions.
6. Efficient Production:
Under monopolies uneconomical and in-efficient firms producing costly goods without any research facilities go out of the market. On the other hand, the situation is quite different with monopolies, which have the advantages of economical and better production.
7. Necessary for Developing Countries:
Monopolies are necessary for developing countries because these alone can produce goods at cheap rates. Moreover, the monopolies can produce better laboratories and well paid and qualified staff. Similarly, the developing countries need variety of goods and it is possible only by big industrialists and industries, which are controlled by monopolists to produce them.
8. Large Financial Resources:
Monopolies usually have large financial resources which can go a long way in expansion of the programme of the firm, in introducing new items, in expansion of market and in providing better facilities and improved working conditions for the workers and the employees, who remain satisfied. With the help of financial resources raw material can be purchased, stored at the most appropriate time and thus the crisis in production hardly arise.
Essay # 7. Disadvantages of Monopolies:
Monopolies have their disadvantages as well. Some of the important disadvantages are as follows:
1. Leads to Exploitation of Workers:
One of the important duties and responsibilities of the industry is to promote social welfare. But under monopolies usually there is exploitation of workers. The industry knows that the workers cannot go out because chances of employment, out of the firm have been reduced to the minimum. It does not care about their welfare, which cannot be justified on any ground.
2. Arbitrary Price Fixation:
One of the characteristics of monopolies is that it can thus fix the price arbitrarily. Usually it is fixed on the very high side. The consumer has no other alternative but to accept the price. In absence of competition, the consumer also cannot bargain as well. Thus this results in many serious problems for the society as a whole.
3. Control over Output:
In monopoly situation the producer decides what to produce when and in what quantity. Obviously he will like to produce only such commodities which give him maximum profit. While deciding about the output he may or may not care for social needs, thereby creating social crisis at any time, by not producing sufficient quantities of the commodities needed by the society.
4. No Gain to the Consumer:
There is no doubt that monopolies enjoy the benefits of large scale economies including production of goods at cheap rates, but monopoly is not prepared to share the gains of large scale economies with the consumers. It wants to keep the profit with itself. Therefore, consumer is least profited by the gains of large scale economies of monopolies.
5. Wrong Allocation of Economic Resources:
Monopoly will try to have maximum control over the economic resources. This is itself a big distortion. Not only this, but in every industry, monopoly can provide employment to very limited number of persons. This has the advantage of new and well equipped machinery. It can place man be machine.
6. Political Corruption Encourages:
In a country with democratic set up, chances of political corruption cannot be ruled out. The monopolists, in order to maintain and strengthen their monopoly will always try to corrupt politicians so that no legislation opposed to their interests is brought forward. They will always influence that political party as a whole, by giving financial support at the time of elections. The monopolies and industrialists will become members of these parties and try to occupy important posts and positions.
7. Concentration of Wealth:
A monopoly situation can be created by those who are already economically strong and sound. Hence this situation has been created more money begins to flow in. It begins to go on concentrating in the hands of only few persons, who control, distribute and fix the price to suit their profit motives. Thus the rich grow richer and their capacity to exploit considerably increases which is good for healthy society.
8. Interests of Workers not Cared for:
In monopolies interests of the workers too are not cared for, while finalising the combinations or mergers. Those who are found surplus in the new arrangements are thrown out of job. Their respective positions are ignored and they are given new positions to suit the convenience and whims of the management.
9. Sacrifice of the Interests of Shareholders:
One of the forms of monopoly is voluntary monopoly. Before combination however, bargains are struck and under hand-deals finalised. In these only individual interests are preserved. The interests of the shareholders are least cared, and protected. It is unfortunate that those who invest money by spending in the shares are made scape goats, for protecting the interests of the few who control the firms. Thus the interests of a vast majority of the people are sacrificed.
10. Corrupt Influence on Business:
Monopolies try to corrupt whole business by using unfair means in the business. In order to eliminate local competitions, the monopolies fix different prices of the same commodity in different localities, thereby encouraging such economic offence and crimes as smuggling. In order to maintain their monopolies, they even fix prices below cost price in some cases, so that the rival is thrown out of market.
11. Apathy towards Technical Progress:
Still another drawback of the monopoly is that it shown an apathy towards technical progress. It is on account of two reasons. Firstly the monopoly feels that any technical progress or advancement is bound to create some dislocation, which will disturb status quo, for which the industry is least prepared under the monopolists.
Then another problem is that the monopoly feels that when their products are already acceptable to the society, why they should spend money on research and technological advancement.
12. Economic Depressions and Cycles:
It is very unfortunate that monopoly, which should have helped in maintaining prices, has acted to the contrary. The investors are usually motivated more by personal rather than by social gains. They create depressions and economic cycles in the way they like. They make the whole economic market erratic, irritating not only the government, but also the consumer.