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how the monopoly profit for people

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How The Monopoly Maximize Profits
Haotian Shen (Sky)
Uvm

Abstract
Information testifies that all economic organizations has their unique model of realizing profitability. It is a role of the entrepreneur to engage innovative programs that will cultivate the entity’s roadmap for profit maximization. The study narrows down to define the respective approaches in which most of the monopolies realize profitability. Critically, the study analyzes an evidence-based price discrimination strategy that is effectively employed by a monopoly to merit more returns on a scale from the people. It defines the factors that contribute to the strategy’s enhancement inclusively, market segmentation, language differentiation and application of different codes based on regions.

How The Monopoly Make Profits from People
A monopoly is a kind of business enterprise model that is the sole provider of services and goods in any particular industry. Studies uproot that the entities have a certain potential to determine the prices and wages of their goods and services respectively. It is a condition that accrues the fact that they discriminate the market in a certain capacity where such an act allows them to make a decision for the prices of the commodities. Such a character distinguishes it from the aspect of perfect competition where prices are determined by the invisible forces of demand and supply. There are two opposite sides inclusively the advantage and disadvantage in the monopolistic market.

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The monopoly enterprise can utilize the monopolistic merits to develop the technology and expand economies of scale that can decrease the cost and sell lower price to the consumer. (Advantages of monopoly 2015) On the other hand, the monopoly maximizes its market through the minimization of supply as an effective strategy to the increment of its profits. “The monopolist choose to produce and sell the quality of output at which the marginal revenue and marginal-cot cultures intersect” (Mankiw 2011).
The formation of a monopoly accrues the increment of competitors in the industry increases where several entities merge up to capture high returns on a scale. Further, the monopoly increases the threshold to obstruct other company enter the market. However, monopoly enterprise also has a far-reaching global impact from different aspects (Mankiw, 2011). It is a perception where the monopoly sets its standards procedures of operation exceeding the capabilities of the common citizens. Therefore, the government makes the anti-monopoly policy to reject the giant company monopolize the market. Alternatively, the government applies the price control system to ensure that the citizens are not discriminated by the market structure. Critically, the monopoly market threats economic safety. It is a condition where the monopolist firm not only upholds control over everything from product quality to market availability, but they can severely affect the societal, economic and political issues (Mankiw, 2011).
When I was 16 years old, I visited where my father sold fur clothing. The first consumer who is a local tyrant spent a large amount of money for a leather coat. The other consumer considered long time for same clothing spent a large amount of money than the local tyrant for the same commodity.
The firm uses the different price to transact the same goods and service, which is referred as price discrimination. “Price discrimination is more prevalent than one might expect: senior citizen discounts, happy hour drinks, Umber surge pricing, business class flights, matinee prices at the movie theaters are all common examples” (Priceonomics 2014). In the modern life, most of the monopolistic enterprises apply the price discrimination to maximize their profits. It is a perception where every buyer has the scope to buy a commodity at a given price according to his willingness. On the other hand, the monopoly upholds the scope to determine the prices of its commodities (Edwards 2014).
The monopolies maximize their profits through the consideration of age as a profit maximization factor where the elderly and the youth’s level of income limit them from meriting the expensive commodities. Therefore, the perception invites the monopoly to engage particular discounts to the groups to favor them. In such an aspect, the profit of the monopoly is realized through the motivation created by the groups (Mankiw, 2011). It is a perception where they buy the particular commodities in bulk since the prices favor their income increasing the level of returns to the monopoly. Critically, the consumers in this groups purchase specific commodities, for instance, computer software. Therefore, the monopoly targets more profits on such products through the provision of discounts that favor the groups of making more purchases. Further, they can maximize their profit if they sell to the working class consumers. It is a condition where they will apply the principle applied to the youth making more returns to the entity. Apart from students, the elderly also buy products at reduced prices. Additionally, the monopolies apply different techniques of realizing profitability apart from price differentiation.
The airline industry is a different example of a monopoly that asserts the manner in which different groups purchase the different tickets. It is an obvious fact that tickets are sold at difference prices for the same destination. The cost of the trip is relatively constant. Therefore, the monopoly management applies economic tactics to enforce price discrimination. Firstly, time is a significant factor in adjusting the price (Mankiw, 2011). It is a condition where, if the travelers reserve the passenger tickets several months in advance, they can obtain the tickets at a lower price. Conversely, they need to pay an enormous amount of money to get tickets on urgent reserve. Secondly, if the travelers choose the leisure day to travel, they will encounter lots of people who have the same plan to travel by airplane. Thus, they need to pay extra money at that time. Thirdly, the consumer needs to pay extra money for seats with more leg room. All the above approaches are effective strategies for maximizing the profitability of a monopoly.
It is evident that the price discrimination approach is a suitable strategy of profit maximization among the monopolies. However, there are some monopolies that do not apply the strategy in the enhancement of profits. One of the most important factors for the character is that the monopolies have the ability to thwart arbitrage. The arbitrage is a way that buyer purchases a product at a lower price and resell it to others who willing use the higher price to purchase. (Edwards 2014) Thus, if the monopoly company cannot prevent the buyer from reselling, the enterprise may not sell the products at different prices. The airplane industry is also a good example of a monopoly which limit tickets are reselling. The airline uses an identification system at check-in thus maintaining their clients separate. Therefore, the employment of price discrimination is facilitated by the creation of different markets segments which sophisticated their ability to interact and exchange ideas about the prices of the commodities.
One of the main tactics employed by the monopolist to separate the markets and realize profitability is the warranties. These warranties are only binding in the region or country of purchase; the products are also labeled and the manual written in the local language prevalent in that region or country. For example, software developers charge low prices for its products sold in low-income regions such as Africa, (Lynn, p 456 2010). The monopolistic use the local languages to discourage the transfer of it product to other high-income regions such Asia. The people in Asia will not understand the language used in the software program. And will opt to buy from the monopoly that will have another similar product but with languages employed in Asia and at a relatively higher price than those found in Africa.
Differently, the regional code is another tool used by a monopoly to control how their products change hands. Codes used for DVDs and games are inbuilt into the products. They do so to ensure that the games and DVDs are only utilized in the regions in which they are sold; this also allows the monopolies to maintain control over the release dates and charge different prices for different regions (Mankiw, 2011). Such an approach provides a suitable ground for the realization of profits. However, the use of regional codes is not efficient as the monopolistic business think, in some regions, the use of codes have been burnt, and the law requires them to provide products that can be used in any region. Also, some unscrupulous customers have found a way to circumvent the regional limit by modifying their consoles to allow them to use games and DVDs from another region without any problem.
Warranties, regional code and student discounts are three important ways to isolate groups and make benefits from people. Nevertheless, these will bring a lot of negative effects. According to the Takanori and Nokia authors said, “It is verified that consumer surplus is never improved; social welfare improves solely owing to an increase in the firms’ profits in the case of linear demands.” (Takanori & Norikia, 2014) Evidently, the application of the price discrimination approach absorbs the aspect of consumer surplus. In other words, the monopoly that use the price discrimination cannot give the consumer more profits.
With the high-speed of globalization, people will be connected with each other. Nevertheless, price discrimination persists because sellers and buyers are willing to trade. And the monopoly can use the miscellaneous factors to perform price discrimination. Evidently its successful technique is the establishment of different segmentation of the market to make it difficult for the consumers to understand the strategy because once the realize it. They will seek the commodities from the market with low prices (Mankiw, 2011). Further, the application of warranties, student discount, product code and language differentiation are major approaches applied by the monopolies to foster price differentiation. Moreover, the price discrimination brings negative effect to people. It is a condition where they cannot benefit a lot of surpluses. Further, the strategy can lead to great loss to the monopoly once the markets link up and enlighten one another about the price variation on the same commodities. Therefore, it is vital to ensure that the operation is based on keenness minimizing the chances of fostering such an awareness. However, investigation depicts that the monopoly will still make profits from people in the future because they rely on the set prices to trade with monopoly enterprises without any compromise.

Reference
Advantages of monopoly. (n.d.). Retrieved July 31, 2015 from http://www.economicshelp.org/microessays/markets/advantages-monopoly/
Edwards, M. A. (2014). Teaching Consumer Price Discrimination: An Interdisciplinary Case Study for Business Law Students. Journal Of Legal Studies Education, 31(2), 291-324. doi:10.1111/jlse.12017
Riley, G. (2015, February 14). Price discrimination. Retrieved July 31, 2015 from http://beta.tutor2u.net/economics/reference/monopoly-price-discrimination
Dhar, R. (2014, September 14). A Case Study in Price Discrimination: Burning Man Car Washes. Retrieved July 31, 2015 from http://priceonomics.com/a-case-study-in-price-discrimination-burning-man/
Mankiw, N. (2011). Principles of economics 5th. Fort Worth, TX: Dryden Press.
Adachi, T., & Matsushima, N. (2014, July 1). The Welfare Effects of Third‐Degree Price Discrimination in a Differentiated Oligopoly. Retrieved July 31, 2015 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434885
Lynn, B. C. (2010). Cornered: The new monopoly capitalism and the economics of destruction. Hoboken, N.J: John Wiley & Sons.

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