What is monopoly, Financial Management

Assignment Help:

MONOPOLY

Several governments consider it necessary to prevent or control monopolies. A untainted monopoly exists when one organisation controls the production or supply of a good that has no close substitute. Actually legislation may consider a monopoly situation to take place when there is limited competition in a particular market. For instance UK legislation considers a monopoly to take place if an organisation controls 25% or more of a particular market.

Governments consider it essential to act against an existing or potential monopoly because of the economic problems that can arise through the abuse of a dominant market position. Monopoly is able to lead to economic inefficiency in the use of resources so that output is at a higher cost than necessary.

Further inefficiency can occur as a monopoly may lack the incentive to innovate to research technological improvements or to eliminate unnecessary managers since it is able to always be sure of passing on the cost of its inefficiencies to its customers. Inefficiencies such like these have been seen as major problems in state-owned monopolies and have fuelled the movement towards privatisation in recent years. It has been usual that the competition arising following privatisation will lead to the elimination of these kinds of inefficiency.

Monopoly can as well result in high prices being charged for output so that the cost to customers is higher than would be the case if significant competition existed allowing monopolies to generate monopoly profits.

The government is able to prevent monopolies occurring by monitoring proposed takeovers and mergers and acting when it decides that a monopoly situation may occur. This monitoring is performed in the UK by the Office of Fair Trading which can refer takeovers and mergers that are potentially against the public interest to the Competition Commission for detailed investigation. The Competition Commission has the authority to prevent a proposed takeover or merger, or to allow it to proceed with conditions attached such as disposal of a portion of the business in order to preserve competition.


Related Discussions:- What is monopoly

Leverage, Evaluate the importance of leverage of financial management on a ...

Evaluate the importance of leverage of financial management on a small scale company.

What is benchmarking, What is Benchmarking "A continuous, systematic pr...

What is Benchmarking "A continuous, systematic process for evaluating the products, services and work processes of an organisation that are recognised as representing best prac

Determine the operating profit of the firm, 1. The Gulf had sales of  AED 2...

1. The Gulf had sales of  AED 20,000,000 and cost of goods sold of  AED 10,250,000. Selling and administrative expenses represented 8 percent of sales. Depreciation was 5 percent o

Leverage, ABC Ltd. Produces electronic components with a selling price per ...

ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annua

Determining the value at a node or backward induction, The value of node is...

The value of node is determined using a methodology called backward induction. The value at any node depends on the future cash flows; therefore, we need to start from

Valuation of shares , Example based on Valuation of Shares Share capit...

Example based on Valuation of Shares Share capital details & Types of Share Hatsun Agro private limited (HAPL) as on March 2008 had a total authorized share capital worth

Variable costs, V ariable Costs It is an expense that varies direct...

V ariable Costs It is an expense that varies directly with changes in business activities for example the cost of raw materials rise and decreases as the volume of producti

Why do financial managers calculate the marginal tax rate, Why do financial...

Why do financial managers calculate the marginal tax rate? Financial managers utilize marginal tax rates to calculate the future after-tax cash flows from investments.  Ever si

Project on investment banking house, The Project to be Addressed by the Pap...

The Project to be Addressed by the Paper: You have just graduated from CCI's MBA program and have secured a position as a fund manager for a well known investment banking house

Assets allocation, Assets Allocation: The investment pattern above shou...

Assets Allocation: The investment pattern above should be followed as under: Fresh accretions to the fund and redemption amounts of investments made earlier should be inv

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd