Essay on Monopoly: Meaning, Advantages, and Disadvantages

Meaning of Monopoly

Monopoly refers to the market situation which happens when a given producer or a group of producers control the supply of a particular product or service.

Attempts of new entrance by other producers are highly restricted.

In their attempt to reap big, most monopolistic firms overprice their products and restrict output. These firms have little regard for the needs of their clients.

For this reason, most governments try to restrict monopoly by doing the following:

  • Nationalizing monopolistic firms,
  • Imposing price control,
  • Splitting the firms into several competing firms
    .However, at times there is a need for monopoly and governments to aid the creation of monopolistic firms.

Advantages of monopoly

  • Monopoly ensures economies of scale.
  • It encourages research and development in order to maintain their monopoly status.
  • Eliminates service or product duplication.
  • Monopoly fosters the growth of successful firms.
  • Avoids loss-making.
  • Allows international competitiveness
  • Fosters national security.
  • A monopoly firm is a good source of a government’s source of revenue.
  • They are able to invest in the latest machinery and technology in increasing their efficiency.
  • A monopolistic firm is a mare capable of bearing innovation risks.
  • Protects intellectual property.
  • No need to use the money to over advertise products.
  • Eliminates the need for heavy investments in order to create products.
  • Eliminates unhealthy competition.
  • Ensures maximum profits for stakeholders.

Disadvantages of monopoly

  • Consumers may be charged exorbitant prices for affordable goods and services.
  • The lack of competition can result in poor quality of products.
  • The consumers may be offered low-quality products and services.
  • Monopoly lacks consumer sovereignty.
  • Restricts market output.
  • Consumer choice is also restricted.
  • Can lead to productivity in-efficiency.
  • Leads to a less competitive economy.
  • Quite costly turning a firm into a monopolistic firm without the governments’ support.
  • Can be manipulated to create artificial scarcity.
  • May limit innovation.
  • Quality may be compromised.
  • There is no variety; consumers are forced to buy what is available in the market.
  • Monopolistic firms may resort to unlawful means of eliminating competition.
  • May lead to reduced efficiency.


Monopoly is mainly viewed to be detrimental to any economy. However, monopoly has a number of advantages which can be exploited to benefit the entire community or country.

The government can also try to control monopoly to reduce the adverse effects of monopoly in the market.

By: Christopher.