Why people dislike monopolies

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An illustration of a monopoly game board with Microsoft written in where the game title Monoploy would be.A monopoly is the other extreme of market structure. It is a market where there is only one firm that is the only provider of a distinct product. No other firms can compete against it because of barriers either in the form of patents, ownership of the essential raw material, or economies of scale -- thus leaving this firm to dominate the market. Generally a monopoly firm is despised by the public because monopolies have a tendency to limit production in order to charge higher prices and make excess profit. Furthermore monopolies may take deliberate actions to prevent entry of new firms in their market. Anti-trust laws have been devised to prevent firms from exercising monopoly power. There are, however, economic circumstances under which it is advantageous to allow one firm to provide for the entire market. Under these circumstances, the government licenses a firm to be a monopoly, but would regulate its production and/or pricing policies. In this section we will discuss the characteristics of a monopoly and will demonstrate how monopoly firms can make excess profit at the expense of consumers, and how such behavior is also unfavorable in terms of allocation of resources.