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3 Answers
- AleconomixtLv 78 years agoFavorite Answer
Natural monopolies are good for consumer.
In fact, the free market is really monopolistic competition in practice.
- Anonymous8 years ago
Yes and no, depending on the context
Natural monopolies such as a state run post service are good.
Pure monopolies are bad for the consumer. Due to imperfect competition, firms can produce less, but charge a higher price which is inefficient.
However, for a developing country, allowing a monopoly to grow at the beginning may make it big enough that eventually, it can compete in the world market.
- wayfaroutthereLv 78 years ago
Monopolies are usually bad in a free market. In a regulated market, it depends on how they are regulated. In free market capitalism, the "price" is "all the traffic will bear"--if other people will pay more for it, then you are (by the "laws" of supply and demand) charging too little for it. If you are the only owner of an item, then everyone needs to pay your price or go without. If you owned something people can't go without, like the water supply, you could become very rich by extortion--no one could drink, have a factory, or grow food unless they got lucky and it rained enough for them to start catching their own water. This is why when communities allow utilities to dig up yards and erect power lines, they give them a monopoly (no one else is selling water in this area) but also give them heavy regulations (and you will charge no more than $___ per gallon to households and $___ to businesses, etc.).
Imagine how utilities would work under pure capitalism. They would need to secure right-of-way from property owners--and one holdout who didn't want their yard dug up could mean that the whole community doesn't get power or internet or something. Then those guys could charge what they want--there is no competition, until someone else buys the right to dig up everyone's yard and compete with the other company. It's easier on everyone to dig up the yards one time, grant a monopoly, and then have the government ensure that the gifts the community and homeowners gave to get the utilities built are not ignored--and that their utilities remain reasonable.