The institutional affiliation
1. A monopoly is defined by many as the domination of one provider of a product or service on the market (Amadeo, 2016). Thus, a monopoly maintains an economy of scale when only one supplier enjoys all the market benefits.
There are a number of positive impacts of monopoly on the national economy (Amadeo, 2016):
Taxes paid by monopoly firms become the major source of the national revenue.
• Monopoly eliminates the duplication and the wastage of resources what cause serious issues in many countries.
Monopoly uses price discrimination which can strengthen the economically weaker sections of the society.
However, there are some opinions criticizing this type of market organization. They identify the following negative impacts of monopoly on the economy (Amadeo, 2016):
• Monopoly can determine the prices regardless of demand. Thus, prices may increase for the products of inelastic demand, where consumers do not have much flexibility.
• Monopolies limit the manufacturer’s initiatives to develop new products. For instance, the creators of disruptive technology, such as notebooks, iPhones, and satellite TV, created a new type of entertainment service which cannot survive within the monopoly.
• Monopoly leads to inflation, as it has the right to set the prices, and then raise the costs.
2. Considering the fact that the certain level of unemployment is supposed to be present even in the healthy economy, there are three types of unemployment demystifying the myth saying that unemployment would not be possible unless the economy operates efficiently (Pettinger, 2008).
Frictional or search unemployment appears while a person is looking for a new job, what is not directly coincides with the economic efficiency. Structural unemployment is caused by occupational or geographical immobility, thus there is also no direct dependence on the economic state. Finally, cyclical unemployment arises when the business activity demonstrates a slowdown (Pettinger, 2008). In fact, the economic efficiency is not the only factor having the negative effects on the business activity, as there are also internal factors which may hurt the company’s well-being even more.
The certain level of unemployment does not have much impact on a market economy. When it comes to a labor market, unemployment is even expected. This is called a natural unemployment rate, which is normal even when the national economy is operating to the fullest extent (Investopedia, 2017).
References
Amadeo, K. (2016). How Monopolies Impact the Economy. Retrieved 17 January 2017, from https://www.thebalance.com/monopoly-4-reasons-it-s-bad-and-its-history-3305945
Investopedia. (2017). Types of Unemployment. Retrieved 17 January 2017, from http://www.investopedia.com/exam-guide/cfa-level-1/macroeconomics/unemployment.asp
Pettinger, T. (2008). Types of Unemployment. Retrieved 17 January 2017, from http://www.economicshelp.org/blog/glossary/frictional-unemployment/
