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

Personal budget project, 15 points) You need to develop a personal budget. ...

15 points) You need to develop a personal budget. Try to be as realistic as possible. If you are going to school and not working then do some research to find out what salary you w

Working capital financing plan for company implementation, What is the most...

What is the most conservative type of working capital financing plan a company could implement?  Explain. An all equity capital structure would be the mainly conservative type

Dividends paper, one page paper reviewing "the Morgan Stanley Oil and Gas R...

one page paper reviewing "the Morgan Stanley Oil and Gas Report"

Setting budget goals and objectives, Setting Budget Goals and Objectives: ...

Setting Budget Goals and Objectives: Having collected and analysed all relevant information, and made general forecasts as to the key areas of concern / opportunity and special

What are the benefits of collecting early and how it attempt, What are the ...

What are the benefits of "collecting early" and how do companies attempt to do this? A fund has time value.The sooner money is collected the better.  Companies utilize regional

Define the wave of mergers in the banking industry, What is behind the wave...

What is behind the wave of mergers in the banking industry? A: Various economic factors have caused banking institutions to merge over the past various years. These factors inclu

Genesis Energy Capital Plan Report, Calculate the firm’s WACC. Prepare and ...

Calculate the firm’s WACC. Prepare and analyze each planned capital expenditure. Evaluate, rank, and recommend the capital expenditures according to beneficial value to the organiz

Analysis of company position, Analysis of Company Position Associated ...

Analysis of Company Position Associated International Supplies Ltd Circulation: Associated International Supplies Ltd (AIS Ltd.) Author: A. Consultant, AXY Consultin

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