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Taylor Amaral
Dr. Gen
Economics
August 5, 2015
Monopolies
The game of monopoly is a fan favorite. Monopoly is a game, which represents an issue in
economics. However many may not think of what an actual monopoly is. When played, the goals
of the game are to manipulate or buy out peoples properties and eventually gain the most profit
through each property. One also has the ability to manipulate the game by putting more houses
and hotels on each property to cause mayhem to the other players. By putting these houses and
hotels, it increases prices on each property, and by doing this it sends the other players into a
state of bankruptcy. Generally, this game is only fun to the person who is winning, or the one that
monopolizes the game. In reality, the domination that occurs in the game Monopoly happens
with big corporations, businesses, and firms. These firms gain profit through monopolizing and
controlling the free market. In other words, a monopoly is defined as a market dominated by a
single seller (OSullivan and Sheffrin 156). Monopolies have existed since colonial times.
Colonists looked towards big businesses to help establish colonies, and have a strong foundation
when being built. For example, the Dutch East India Company dominated the world in the 1600s,
they had all the power to influence national affairs because its product supported so many
countries. Monopolies have created powerhouses like Rockefellers Standard Oil Company,
Andrew Carnegies Steel Mill Company, and the railroad industry. In our current day, invisible
monopolies exist as well. Netflix Inc. is the new upcoming monopoly that allows people to
stream movies as well being a mail delivery rental business. In addition, Lulu Lemon is another

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future monopoly in yoga clothing and athletic wear. Although people love companies like Netflix
and Lulu Lemon, monopolies pose a major threat to the American economy. Monopolies bend
and manipulate the free market system for selfish reasons and they provide little benefits to the
consumers, communities, and economy as a whole. Through the stealing of consumers rights,
abolishing of competition, and the unfair raising of prices, monopolies prove that they are in fact
harmful to the American economy.
When monopolies take away the power of the consumers and their rights, they are ultimately
harming the free market and the American economy. One of the many benefits of living in
America is our free market and with a free market comes the freedom of consumers as well. As
mentioned, free market economies have the highest degree of economic freedom of any system.
This includes the freedoms of individuals to consume what they want to get (OSullivan and
Sheffrin 32). Anytime a person buys a desired product it is actually demonstrating their freedom
within the market system. By living in a free market system, the consumers show consumers
sovereignty. For example, when consumers start to buy more of the same product, the demand of
the product then increases. Then when demands go up, production of that product also go up.
This process is known as consumer sovereignty. As defined by Prentice Halls Economic
textbook consumer sovereignty is, the power of consumers to decide what gets produced
(OSullivan and Sheffrin 32). When the consumers are in control of the market that is when
consumer sovereignty rules and a free market thrives. When a monopoly controls a market, all
these freedoms are thrown away. When monopolies take over a market, they take all the
competition away. In the 1800s, when Rockefellers standard oil company was thriving it had
control over every single oil company. This means that the only oil being produced in that market
was Rockefellers. Since this was the only company to control the product it had all the freedom

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to manipulate the market for that product. When monopolies take over, they also wipe out all sort
of competition and when the competition is knocked out, it does not allow consumers to practice
the freedom of buying the product they want by whatever brand they want. Ultimately, because
monopolies only cast one product they take away a consumer's right of having options as well as
controlling the market. For instance, even if a products demand is sky high, the monopolies have
a choice of how much they can supply, output, and price that product. The actions that
monopolies practice take away all aspects of consumer sovereignty. As a result, they tarnish the
ideas of a free market system.
Generally in a free market system, it is also a competitive market system. In a competitive
market, the companies look to progress and better their products to make them more desirable to
the consumers. However, because monopolies have no competition, they do not look to improve
their products but simply, keep supplying a lackluster product. Among the ways in which
unregulated monopolies can harm an economy are by causing lower level of quality than would
otherwise exist. This includes not only the quality of the goods and services themselves, but also
the quality of the services associated with such goods and services (Linfo). Due to the result of
no other companies in the market, monopolies do not feel the need to advance their products.
This ends up hurting the consumers because they are forced to buy products that may not be to
the best of quality, but because the product is under a monopoly, the consumer has no choice. In
some cases, monopolies actually believe that bettering a product does nothing for the company.
Innovation is not as necessary for a monopolist as it is for a highly competitive firm, and in fact,
it can be a bad business strategy. Research and development by monopolists is often largely
focused on ways of suppressing new, potentially competitive technologies rather than true
innovation (Linfo). This means that monopolies actually view innovations as a way to invite

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other companies to a market. When innovations are made, it creates that competitive atmosphere,
so in response monopolies take this away completely. In todays cellular market, we have the
iPhone and the Samsung Galaxy. Each time there is a new model of an iPhone a new version of a
Samsung Galaxy also comes out. This shows healthy competition, however if this were a
monopoly ruling the telephone industry, it would be the opposite. Instead, the monopoly would
look for a ways to limit product advancements, forcing customers to only buy that one model.
Because monopolies do not try to better the products, the consumers buy mediocre products.
Another example of this is when The Wall Street Journal explains how In the 1930s, AT&T took
the strangely Luddite measure of suppressing its own invention of magnetic recording, for fear it
would deter use of the telephone (Wu). This shows how AT&T wanted to limit their products
advancements, to sever any chances of other firms to enter the market. Monopolies find no
restraint in shaping the economy to their needs. They choose to hold back their products
advancements as well as consumer rights, only to benefit themselves while hurting everyone
else.
Monopolies destroy the free market system by wiping out all competition within the market.
Competition is defined by Prentice Halls Economic textbook as, the struggle among producers
for dollars of consumers (OSullivan and Sheffrin 31). Competition is a natural aspect that
occurs. Competition occurs in markets when given both money and opportunity and is
sometimes a side effect of self-interest. In a market system, many companies and firms have both
of these attributes, resulting in the formation of a competitive market. For example, Self-interest
and competition work together to regulate the economy. Self-interest spurs consumers to
purchase certain goods and services and firms to produce them. Competition causes more
production and moderates firms quests for higher prices (OSullivan and Sheffrin 31).

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Competition is not just a competition for wealth, but is healthy for the economy. Competition
leads to advancement in products, regulating prices, higher technology, and a better economy. Or
in other words, everything a monopoly rejects. Under perfect competition, every economic
agent is a price taker and the price mechanism is not manipulated by anyone. Competition is the
best way to ensure the most efficient allocation of resources and to best serve consumer welfare
by providing goods and services at the most competitive (the lowest) price (Chin 82). Sadly,
monopolies reject this idea, they destroy competition and prices rather than accepting it.
However, in monopolies there is disequilibrium. No competition means no natural regulation of
prices and ultimately, no natural free market system. Monopolies destroy the free market system
by taking away competition. Monopolies are motivated by self-interest. With a lack of
competition, even the government struggles to prevent monopolies from rising. Americans can
no longer count on open markets for their ideas and their work. Because of the overthrow of our
antimonopoly laws a generation ago, we instead find ourselves subject to the ever more
autocratic whims of the individuals who run our giant business corporations (Lynn 27). Laws
such as the Sherman Antitrust Act prohibited monopolies from forming under certain conditions,
however this law proved to be faulty. Monopolies still arose by finding loopholes and
sidestepping the regulations. Ever since then, having monopolies in the economy no longer gives
entrepreneurs the opportunities they are supposed to be granted in a free market. Monopolies
diminish opportunities and strangle what we know as the free market system.
Monopolies are successful at keeping other companies from joining the market because of
barriers of entries. Barriers to entry are factors that make it difficult for a new firm to enter the
market (OSullivan and Sheffrin 153).A barrier of entry can be the initial development problem,
like when a firm wishes to join the market they have to prepare for paying start up costs. These

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are, the expenses a firm must pay before it can began to produce and sell (OSullivan and
Sheffrin 153). When start up costs are high it makes it more difficult, but when a monopoly is
also within the market it makes it nearly impossible for the new firm to be successful. If in a rare
case another company does make it into the market, monopolies have the power to manipulate
the prices. For example, if there is a monopoly with the product of oil, then another random oil
company arises, the monopoly will drop prices so low that the other company will not be able to
compete. When this tactic is used, the random oil company will drop out of the market. Once the
competition is knocked out the monopoly will then raise it prices back to the regular standard.
This manipulation of prices is very harmful to the economy because it does not create the natural
market system flow. Monopolies have used many tactics before to wipe out competition by using
prices. One heinous tactic is, Temporarily lowering prices, or even offering a product for free, to
drive competition out of business. Once the competitors have given up, the monopolist raises
prices to their profit-maximizing level (which is usually substantially higher than the level that
competitors charged) (Monopoly Brief Introduction). This clearly demonstrates how
competition and prices coexist, Compared to a perfectly competitive market, a single-price
monopoly restricts its output and charges a higher price (Vandewetering). When prices are
altered it ultimately messes with the equilibrium of the market. When there is no competition,
there is no natural equilibrium of prices within the free market. Equilibrium is the point where
demand and supply come together at the same number of slices is called the equilibrium.
Equilibrium is the point of balance between price and quantity (OSullivan and Sheffrin 125).
In a competitive market, it is the act of competition that drives prices towards the equilibrium
price and quantity at which the marginal firm makes zero economic profits - they are earning just
enough money to cover their costs of production and to pay their owners a return that is

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sufficient to cover their risks (Posner). When monopolies are in rule, this is not the case.
Monopolies end all competition by knocking the other firms out by price manipulation. When
monopolies manipulate prices, they only manipulate the market to their benefits. No consumer of
business will benefit. For example, monopolists not only have the ability to charge a higher
price than would competitive firms supplying the same product, but they also have the ability to
charge significantly different prices to different customers for the same product (OSullivan and
Sheffrin 163). This clearly demonstrates one of the tactics that monopolies use to drive out and
manipulate competition. As a result, monopolies only hurt the economy. A free market system is
where prices regulate themselves through different companies and where competition is healthy.
Furthermore, with monopolies all that happens is a starving economy and suffering consumers.
Today, we see these issues when it comes to medical institutions. The price we pay is not only
economic but also cultural; as Deadly Monopolies will reveal, medical culture itself has been
transformed in the upheaval of the last thirty-plus years, as the university has been made into a
partner of, or even an arm of, for-profit corporate entities. Unaffordable medications are merely
the tip of this iceberg. (Washington 8). Monopolies are growing, and it is hurting consumers
that need medical help. This shows how when monopolies dominate a certain field of the
economy, everyone suffers except the minds behind the monopoly.
Monopolies have proven that they harm the economy. They rob the citizens of their basic
rights that were guaranteed by the free market system, limiting the ability of consumers to buy
the goods that they wish. They also limit the consumers ability to judge a product based on
prices or quality. Monopolies limit the economy by wiping out all competition, which ultimately
wipes out all hopeful opportunity. A healthy market is supposed to have competition because
competition brings healthy pricing and purchasing as well as a market that is pushed towards

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equilibrium. Monopolies push the market away from this causing disequilibrium, price
discrimination, and ultimately a weak economy. The main issue of monopolies is that every
problem is connected to one another. All the negative parts of monopolies are intertwined to form
one big web of negative results. When competition is wiped out, monopolies can raise prices,
forcing consumers to buy an expensive product because they have no other options. Without
options there is no freedom. Like the board game, the object of the game is to buy as many
properties as possible. Then once properties are purchased the individual can build onto that. One
can add hotels and houses to increase the value of the property. But while making ones life and
so much better in this board game, the actual object of the game is to make the competitors
bankrupt so you can win the game. Ultimately, the winner of monopoly is the one with the most
power. With the combination of self-interest, wealth, and making competitors bankrupt the
formation of a perfect monopoly arises. Imagine a monopoly taking over reality; we would all
suffer, while the one behind all the negativity wins. America is the land of the free, not the land
of the monopolies. We survive with free market systems and competition, not with self-interest
institutions. We have survived all these years because of the free market and a healthy economy
that we have created. The United States is the land of opportunity. With monopolies there is no
opportunity, and we are built on opportunity.

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Works Cited
Chin, Anthony, and Hock Guan. Ng. Economic Management and Transition towards a Market
Economy: An Asian Perspective. Singapore: World Scientific, 1996. Print
"Monopoly: A Brief Introduction." Linfo. The Linux Information PRoject, 20 Jan. 2005. Web. 29
July 2015.
Lynn, Barry C. "Killing the Competition." Harpers Magazine. N.p., Feb. 2012. Web. 1 Aug.
2015.
O'Sullivan, Arthur, and Stevenv M. Sheffrin. Economics: Principles in Action. Needham, MA:
Prentice Hall, 2003. Print.
Posner, Barney. "Market Power and Monopoly." Welcome! Pennsylvania State University. Web.
29 July 2015.
Vandewetering, Ike. "Monopoly." 2.econ.iastate.edu. Iowa State University. Web. 30 July 2015
Washington, Harriet A. Deadly Monopolies: The Shocking Corporate Takeover of Life Itself, and
the Consequences for Your Health and Our Medical Future. New York: Doubleday, 2011. Print
Wu, TIm. "In the Grip of the New Monopolists." The Wall Street Journal. N.p., 13 Nov. 2010.
Web. 06 Aug. 2015

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