CRITICISM OF MONOPOLY
People look al monopolies with suspicious eyes because it is thought that monopoly involves exploitation of the consumers. Because of their anti-social consequences, governments have taken steps to control and regulate monopolies so as to compel them to work in public interest. The various objections raised against monopoly are stated below: Firstly, it has below pointed out. as explained earlier in the chapter, that monopolist finds it possible and profitable to restrict output and charge higher prices than would the competitive producers. The profit maximising price of the monopolist is very likely to set a scale of production below the optimum size possible for the monopolist, This means that monopoly docs not seek to use fully the internal economics of production and thereby lower the C01>tper unit. and the price. The result is thaT the consumers pay more for the product than thc cost of production. Thai is, they pay more than what i~necessary to put the resources in the industry .• Owing III the reduction in output. the complementary factors have 10 seck cnt elsewhere, there their marginal productivity will he lower. COIIsequcnily, the price that these complementary factors will felch will be correspondingly lower, On the other hand, the volume of output in other industries, to which CRITICISM OF MONOPOLY People look al monopolies with suspicious eyes because it is thought that monopoly involves exploitation of the consumers. Because of their anti-social consequences, governments have taken steps to control and regulate monopolies so as to compel them to work in public interest. The various objections raised against monopoly are stated below:

Firstly, it has below pointed out. as explained earlier in the chapter, that monopolist finds it possible and profitable to restrict output and charge higher prices than would the competitive producers. The profit maximising price of the monopolist is very likely to set a scale of production below the optimum size possible for the monopolist, This means that monopoly docs not seek to use fully the internal economics of production and thereby lower the C01>per unit. and the price. The result is thaT the consumers pay more or the product than thc cost of production. Thai is, they pay more than what i~necessary to put the resources in the industry Owing III the reduction in output. the complementary factors have 10 sec ~Il1 lloYd\1cnt elsewhere, there their marginal productivity will he lower. COIIsequcnily, the price that these complementary factors will felch will be correspondingly lower, On the other hand, the volume of output in other industries, to which these productive resources have been transferred will expand. Thus. the owner of the monopolised resource has a higher income. whereas the owners of the other resources are worse off. Such will be the consequences through: about by the revisions in consumer income allocations induced by these income and price changes. They will also be the result of ripples of changes affecting the organisation of production. Further, monopoly involves misallocation of resources. The monopolist will not use resources at their peak potential efficiency. His profit maximisation docs not necessarily indicate either the optimum rate of output or the optimum scale of the plant. In other words, under monopoly the allocation of resources is not conducive to maximum welfare or satisfaction. Maximum welfare of the society requires that the level of output should be fixed at the point where marginal C05t equals price. Uut price set under monopoly stands above marginal cost and docs not therefore maximize welfare. Price is indicative of the marginal utility or satisfaction derived by the society from the good. Therefore. society will gain in welfare if more resources arc employed to produce more of that good so that price \i.I’ .. marginal utility) becomes equal to marginal cost. But the monopolist finds it profitable to restrict output to a level at which price is higher than marginal cost. and. therefore, he employs fewer resources than are justified from the point of view of social welfare.

The monopolist forbids the entry of resources in the desired quantities. They must, therefore, remain in use elsewhere. where their contribution to consumer’s satisfaction is smaller. Another criticism of monopoly is that the supernormal profits. which monopolists make. contribute to greater inequality in the distribution of income. Under competitive conditions, firms will, earn only normal profits III the lung-run. But surplus profits are persistently raised by mou pohst evening the long run. But surplus profits arc persistently raised by monopolists even in the long-nul. By virtue of their monopoly power. monopolists obtain a large share of the national income. 11lUs. monopolies increase income inequalities ill the country. Further, it has been alleged that monopoly records technological progress . Incentives to develop ncw products and new techniques Oil the part of monopolist arc very weak.  because there ale rivals of the monopolist. It only competition which induces one to introduce improved techniques so as to improve efficiency and productivity. absence of competition. monopoly can warlord tll be inefficient and lethargic. Moreover, it has been argued that a monopolist is likely to resist or withhold technological improvement in both product and productive techniques in order to use the present capital equipment fully, Introduction of new and improved products and techniques may be resisted by the monopolist to avoid any losses caused by the sudden obsolescence of existing machinery and equipment. The monopolist may. through advertisement and sale promotion measures, enlarge the demand for his products and even may make the demand less clastic by convincing the people of the desirability, nay the indispensability, of his product. Finally. it is argued that monopoly creates unemployment. As explained before, monopoly restricts output to raise the price. When output is smaller. fewer mcn will be employed. hence. retrenchment and unemployment. In other words. monopoly equilibrium is an equilibrium with capacity’. which means that there is under-utilisation of resources.