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Monopoly Services - Assignment

   

Added on  2021-04-24

4 Pages744 Words185 Views
Running head: Monopoly0Monopoly Services byState

Running head: Monopoly1Monopoly is a market where there is only single seller in the market and no close substitutefor the product or service is available in the market. Monopolist can charge any pricewhatever they want as they are the single source of the particular product or service. Inmonopoly market, there are barriers in entry of firm, barriers like natural barriers, artificialbarriers because of these barriers, companies are prevented to enter the market and state(government) enjoys the monopoly. There are various reasons that state is providing the monopoly services. The economicadvantage of such state monopolies is that, they help to keep costs low of products andservices by using the concept of economies of scale, and provide services which are widelyapproachable to the general public. They are not affected by market constraints, which helpskeep out price rise. Such firms become monopoly because of their size and nature ofbusiness. And monopolies of these existing firms make troublesome task for the new firms toenter in the market. These industries incur high fixed cost for example internet services,railways [ CITATION The76 \l 16393 ]. In monopoly, seller earns the abnormal profits in the longrun. As he is the only seller with no close substitutes available in the market so consumersdon’t have choice they have to purchase that product or service only[ CITATION Kor15 \l 16393 ]In certain cases Government has the only license to produce that particular goods andservices. For example, when national railways transportation is created by the government, inmost cases they are permitted the freedom on the functioning of passenger trains in thecountry. The political argument for nationalisation of industry is that the services given to allsector should be given uniformly. As seller (government) fixes the prices or cost of thatparticular product or services and becomes the price maker so can charge any price fromconsumers. In monopoly market, there is use of price discrimination which provide add on

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