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

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

Future value of money, john has two options from which to choose one: (a)E...

john has two options from which to choose one: (a)Either to pay shs24m for the motor vehicle now . OR (b)To pay for the car in four equal regular installments of shs7m ea

Computing forward rate, We can compute any forward rate using the spo...

We can compute any forward rate using the spot rate. When we tell 3 years forward rate 4 years from now, there are two elements to consider. One is the length of

Define the cash budget, Q. Define the Cash Budget? Cash Budget: - A cas...

Q. Define the Cash Budget? Cash Budget: - A cash budget is an estimation of cash receipts and cash payments for a future period of time. It is prepared to predict the cash requ

What is an annuity, What is an annuity? An annuity is a series of equiva...

What is an annuity? An annuity is a series of equivalent cash flows, spaced consistently over time.

Explain compound value of an annuity, Q. Explain Compound Value of an Annui...

Q. Explain Compound Value of an Annuity? Compound Value of an Annuity: - Annuity demotes to the periodic flows of equal amounts. FV = A {(1+i)n - 1}/i Instance: - Mr. X i

Total return analysis, A trade is assessed on the basis of its perfor...

A trade is assessed on the basis of its performance. Performance can be defined as the expected total return over and above the investment horizon of the trade. T

Show social and regulatory factors, Q. Show Social and Regulatory Factors? ...

Q. Show Social and Regulatory Factors? Regulatory climate and legislation against the environmental degradation may impair the profitability of the industry. Price control, vol

Accounting or average rate of return , I need a report on Accounting or Ave...

I need a report on Accounting or Average Rate of Return. Can you please assist me for Accounting or Average Rate of Return report for about 2500 words?

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