Theory question 109
Market Structures(a) Outline any three disadvantages of monopoly.
(b) In what two ways can monopoly power be controlled?
Show the model answer
Model answer
(a) Any three: higher prices than under competition; restricted output; consumers have no choice; poor quality goods and services; exploitation of consumers through price discrimination; inefficiency because there is no competition; abnormal profits at consumers' expense.
(b) Any two: price control/regulation by government; nationalisation; anti-monopoly laws; heavy taxes on monopoly profits; encouraging competition (removing barriers, allowing imports); consumer protection agencies.
Explanation
Each disadvantage should show how consumers lose.