A Natural Monopoly In Economics, a natural monopoly can be defined as an industry where the fixed cost of the capital goods is so high that it is not profitable for a second firm to enter and compete. The reason is that the nature of that product or service makes a single supplier more efficient than multiple, competing ones. The purpose of this essay is to discuss that the economic arguments for and against on privatizing a state run natural monopoly. You will find out on following contents. Main body --------- Natural monopolies are typically utilities such as water, electricity, and natural gas. It would be very expensive to build a second set of water and sewerage pipes in a city. Because this sort of service has a high fixed cost and a low variable cost. To prevent utilities from exploiting their monopolies with high prices, they are regulated by government sometime. Typically, they are allowed a fixed percentage of profit above cost. But this type of regulation can lead to inefficient high costs, since the monopoly is guaranteed a profit. To get around this problem, the government districts own the local utility and provide the service at cost. Another way to handle the natural monopoly is a significant shift of resources out of the state sector and into the private sector. Many governments around the world have followed this policy. For State owned monopolies across the world have proven themselves unable to invest properly in infrastructure, they provide relatively expensive and inefficient services and have poor labour re... ... middle of paper ... ...ises such water supply, electricity, and telecommunications will always remain monopolistic in nature. It may not matter whether they are public or private. It is only in very large markets where there are sufficient economies of scale allowing for serious competition among privately owned utilities. Conclusion ---------- In conclusion, the arguments for privatising natural monopoly businesses are the same as for privatising any business. These monopolies usually dominate any nation's national economic efficiency, access to investment capital, innovative technology and effective management is even more important. Even after this kind of concern, we have to continue searching, through learning by doing, in order to reduce the power of monopolies on the daily lives.
Municipal control or an alternative delivery method? This is the question that has intrigued all levels of local government and created intense debates between taxpayers across municipalities. The services that municipalities provide are often vital to the existence of a local area. The issues of accountability, cost savings, quality of service and democracy often arise when choosing the best options to deliver services to a municipal area. In recent years the concepts of privatization, alternative service delivery and public-private partnerships are often promoted as ways cut down on overburdened annual city budgets and promote a higher quality of service to citizens. Municipalities have historically always provided basic services such as fire protection, water purification/treatment and recreational facilities. However, would private companies or another municipality be able to better deliver the same services more efficiently or at a lower cost? The city or town often provides a political grass roots approach to most local problems. Municipalities are better positioned and have a wider scope to provide services to their constituents in order to ensure quality of service that does not erode accountability and transparency, or drive the municipality deeper into debt.
By the turn of the nineteenth century, American industry experienced a dramatic upturn in popularity. However, though this industrialization was crucial for America's economic development, it also inevitably led to social turmoil. Corruption was rampant among government figures, and they bribed people with money, jobs, or favors to win their votes. Referred to as the Gilded Age, this era was indeed gilded, masking a plethora of social issues behind a thin veil of economic success. The most notable problems stemmed from the justification of what was called laissez-faire economics, in which the poor were believed to be poor exclusively based on their own shortcomings. The abundance of disposable factory workers faced awful hours and were treated
Henry Ford was an American industrialist and the founder of the Ford Motor Company, who stated, “business is never so healthy as when, like a chicken, it must do a certain amount of scratching around for what it gets” (Ford). In the corporate world, individual businesses control other corporations in order to improve their own systems and products. On the macroscopic scale, it is comprised of the corporate world; however, examples of monopoly from the corporate world can be translated onto the microscopic scale. The microscopic scale is primarily the community of families in this society. Families and corporations share this similar idea. Parents dictate their children’s development, and within a relationship one gender may show more power and influence on the other. For the most part, the selfish characteristic of society is the manifestation of monopolism and it raises moral and ethical issues because these acts are inconsiderate of the loved ones around them.
The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price.
During the Gilded Age, many new industries come into light, new ways of business,all because of industrialist.
Bolivia was once a rich and prosperous country but is now one of the poorest nations in the world. The economy of Bolivia used to be rich in agriculture and mining but now searches to find something prosperous again. Privatization of certain companies has started in the country but was expelled when mass protests began. The companies’ prices are too high and the people used their culture and history to get rid of them. The Cochabamba protests of 2000 and the Bolivian gas referendum of 2004 are a couple of examples that show the power the people of Bolivia have over their own government.
*Every semester I teach college Sociology classes I always have my students play a game of Monopoly. They don't play normal Monopoly though but one with special rules designed to teach them about how social class and wealth impact success and failure in life.*
The Standard Oil Monopoly John D. Rockefeller was the founder of the Standard Oil Company. He opened his first refinery in Cleveland, Ohio in 1863. In 1870 he created Standard Oil. By the 1890s, Rockefeller controlled 90% of the United States pipelines and refineries. Many critics of Rockefeller claim this was due to unfair business practices which gave him a monopoly on the oil market.
...ncreasing the capital So ( Falsely ) the books looked very good the business is ending up making money and again the trial balance and the account equation are correct
In the 1870’s, J. D. Rockefeller’s Standard Oil Company was established as a monopoly in the petroleum refining industry in the United States. How he managed to achieve this has always been an economic puzzle because the refining industry, at that time, had many small firms. Moreover, there were minimal barriers to entry into the industry. By 1879, Rockefeller was in control of more than 90 percent of the US’s refining capacity and “maintained a dominant share of refining, in spite of the fact that entry into refining remained easy” (Granitz and Klein 1996, p. 2). Over time, there have been many efforts to explain the Company’s growth; the most sophisticated economic discussion of the monopoly creation is by Elizabeth Granitz and Benjamin Klein in their 1996 article. In 2012, George Priest from Yale University offered an alternative theory for the success of Standard’s refining monopoly. This paper will provide a critical summary of the key issues raised in both the articles.
Contracting out is the process through which public organizations contract with private sector organizations to provide services normally provided by public agencies. It is a form of privatization, which is defined as any shift of activity or functions from the state to the private sector, more specifically, the shift of production of goods or services from public to private. (Starr, 5) Privatization reduces the role of government and increases the role of private sector agencies. However, public agencies maintain ultimate control over the provision of services and they control government funding.
Monopolies have a tendency to be bad for the economy. Granted, there are some that are a necessity of life such as natural and legal monopolies. However, the article I have chosen to review is “America’s Monopolies are Holding Back the Economy (Lynn, 2017)” and the name speaks for itself.
The Era of Privatisation Introduction It was under the Thatcher government that the era of privatisation started and it was “the most radical change in the 20th century British politics” (Young, 2001, p. 1). From 1984 to 1991, the telecommunications, gas, water and electricity industries which were under government control, were sold to become privately owned and controlled. The privatisation of the electricity industry occurred in 1990 but had already begun in 1987 with the creation of a programme describing the different tasks involved in privatising the generation, transmission and distribution of electricity.
deal with “luxury” goods (Exhibit N). It is important to note that the sale of “luxury” goods is affected more
Question: “A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly’s output.” Discuss using relevant diagrams or algebra.”