ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Potential Competition: The monopolist may fear potential competitors. The monopolist at present may not have any competitors; but, if he consistently charges high prices for his product, the new competitors may emerge to throw a challenge and ultimately may succeed in break his monopoly position.

Detailed explanation-2: -Trusts are problematic for several reasons. Monopolies develop from trusts and give total control of a specific industry to one group of companies. Owners and top-level executives of monopolies profit greatly, but smaller businesses and companies have no chance to make money at all.

Detailed explanation-3: -Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods and services, greater variety, and more innovation.

Detailed explanation-4: -The new research also shows that monopolists typically increase prices by using political machinery to limit the output of competing products-usually by blocking low-cost substitutes. By limiting supply of these competing products, the monopolist drives up demand for its own.