A monopoly is a single supplier in the industry and they gain monopoly power if they have at least 25% market share in the market. Although monopolies in the mind of consumers are seemed as bad this may not always be the case, as monopolies may not necessarily abuse their power. Therefore in my essay I will be discussing the benefits of monopolies on consumers, and show that they can have positive effects.

Firstly, monopolies are not seemed as bad for consumers as they can exploit economies of scale. This means that as the monopolies increase their production it can lead to a lower average cost. As shown in the diagram below. It is producing at a level where it can still achieve economies of scale by expanding production. This can help consumers benefit from lower prices. Industries that have natural monopolies such as the steel production or water or electricity companies are inherently more effect then when there are many firms providing the same service. Infrastructure will needlessly double and lead in inefficiency. Society i better off restricting the market to one firm because by producing more it is able to reduce its costs, something many firms cannot do by themselves.

However the extent to which this depends upon whether the monopolies are incentivized to give lower prices to consumers. Like all firms monopolies also have the aim of profit maximizing and therefore they still have the incentive to reduce their sales and charge at a higher prince than in a competitive market, leading to losses to society and profit for them. Also they will seek in maintaining the dominance of a market, which can be bad for consumers.

Secondly, monopolies can help consumers benefit from the research and development the monopoly will be able to carry out. Since monopolies are protected from competition, they can enjoy some profits and therefore be able to invest in