Topic > The Benefits of Monopolies - 712

The monopoly system that businesses achieve, through longevity in the market and government funding, has once again proven harmful to consumers. In the discussion of fairness and efficiency, monopolies have the advantage of being able to set the marginal price above marginal revenue, which in turn exceeds marginal cost. This is a distinct advantage over markets that contain perfect competition. This dilemma causes pain in customer markets, due to the lack of options demand is rarely affected by price changes as there are no substitutes to turn to. The article outlines the current customer response to the highly monopolized government-run business, the United States Postal Service. In Cocktail, for example, the government drastically gave subsidies and benefits to the United States Postal Service, such as mailboxes that can only be used by their business. This increases the steep curve for another possible competitor to enter the market, which demonstrates the monopoly they hold. Secondly, due among other things to the government's direct interference in the market, the issue of fairness can also be questioned. The economic definition of equity is defined as the ability of the economy to use resources and distribute them equally among members of society. The following quote explains the inefficiency created by a monopoly and government intervention in the market: “When a government intervenes to change the price or quantity to an amount other than the efficient free market amount, economists say that the government it's distorting the market." (Cocktail Party Economics, 142) Most likely, when a government establishes a monopoly, as seen in the article, the price paid by consumers increases dramatically. With a limited number of options available for the same service, monopoly operators will act with greedy intentions and will be passed on to consumers. This in turn directly affects fairness (CocktailParty Economics, 120). This leads to a loss of allocative efficiency, as resources are no longer used at a price that consumers want to pay, as expected from the competitive market equilibrium. In addition to that, monopolies not only increase the price of the product to cause inefficiency, but also directly manipulate the supply. “The greatest sin – from society's point of view – committed by the monopolist is not to overcharge for his products, but to underproduce to maximize his profits.” (Cocktail Party Economics, 120). This again refers to allocative efficiency, as resources are not used to their full capacity. In conclusion, government intervention or a monopolistic approach to business almost always causes market failure due to deadweight loss and inefficiency, ignoring equity. This could easily be seen in a real-life example, outlined by operations conducted by the US Postal Service. By charging unrealistic amounts for their services and abusing their subsidies, they have run their business to maximize profits while neglecting efficiency and