Assess the Advantages and Disadvantages of Government Intervention to Abolish Monopolies

In: Business and Management

Submitted By Miles3
Words 417
Pages 2
There are various ways in which governments can intervene to abolish monopolies. A monopoly can be used in different ways and there are two types of monopoly. A monopoly is a market dominated by one firm whereas a pure monopoly is one firm only in a market, an example of a monopoly would be Microsoft.
Governments abolishing monopolies enable firms to compete with one another; this therefore increases businesses and allows more firms in a market. By abolishing monopolies it could increase smaller firms to increase in size, by doing so would create more job applicants leading to less unemployment and by a firm increasing in size, the average total cost per unit to make would decrease. We can demonstrate this by using an average total cost curve.

Another advantage would be that monopolies often produce goods and services at a small level and price it high, monopolies can do this because the lack of competitors in the market, so by eliminating the monopoly, the goods and or services will be produced at a high quantity and prices will be set lower.
Although abolishing a market can have its positives to other, smaller firms but it also comes with disadvantages. With multiple firms in the market both operating at the productively efficient point they become perfect substitutes for one another causing firms to lower their prices in order to compete with the other firms. By doing this they hope to achieve an incentive to the consumer in order for them to consume their goods or services but often firms are reluctant to do this because often the costs to produce the goods or services outweigh the revenue and therefore decreasing profit to a minimal or even in some cases, the firm will make a loss.
Another disadvantage for the government intervening to abolish monopolies is that only one firm can operate at economies of scale fully, this leads to one firm…...

Similar Documents

Government Intervention in Global Business

...Intervention in the market What are the main reasons for government intervention? The main reasons for policy intervention are: •To correct for market failure •To achieve a more equitable distribution of income and wealth •To improve the performance of the economy Options for government intervention in markets There are many ways in which intervention can take place – some examples are given below Government Legislation and Regulation Parliament can pass laws that for example prohibit the sale of cigarettes to children, or ban smoking in the workplace. Employment laws may offer some legal protection for workers by setting maximum working hours or by providing a price-floor in the labour market through the setting of a minimum wage. The economy operates with a huge and growing amount of regulation. The government appointed regulators who can impose price controls in most of the main utilities such as telecommunications, electricity, gas and rail transport. Free market economists criticise the scale of regulation in the economy arguing that it creates an unnecessary burden of costs for businesses – with a huge amount of “red tape” damaging the competitiveness of businesses. Fiscal Policy Intervention Fiscal policy can be used to alter the level of demand for different products and also the pattern of demand within the economy. Indirect taxes can be used to raise the price of de-merit goods and products with negative externalities......

Words: 821 - Pages: 4

Advantages and Disadvantages of Transnational Corporations

...Advantages and Disadvantages of Transnational Corporations Host Country: Advantages 1. The investment level, employment level, and income level of the host country increases due to the operation of TNC's. 2. The industries of host country get latest technology from foreign countries through TNC's. 3. The host country's business also gets management expertise from TNC's. 4. The domestic traders and market intermediaries of the host country gets increased business from the operation of TNC's. 5. TNC's break protectionism, curb local monopolies, create competition among domestic companies and thus enhance their competitiveness. 6. Domestic industries can make use of R and D outcomes of TNC's. 7. The host country can reduce imports and increase exports due to goods produced by TNC's in the host country. This helps to improve balance of payment. 8. Level of industrial and economic development increases due to the growth of TNC's in the host country. Disadvantages 1. TNC's may transfer technology which has become outdated in the home country. 2. As TNC's do not operate within the national autonomy, they may pose a threat to the economic and political sovereignty of host countries. 3. TNC's may damage the domestic industry by monpolising the host country's market. 4. In order to make profit, TNC's may use natural resources of the home country indiscriminately and cause depletion of the resources. 5. A large sums of money flows to foreign countries in terms of payments...

Words: 375 - Pages: 2

With Considered Reference to Scholarly Literature on the Subject, Assess the Advantages and Disadvantages of Cannabis Legalisation in Australia.

...2.  With considered reference to scholarly literature on the subject, assess the advantages and disadvantages of Cannabis Legalisation in Australia. Dennis, M.L. & W White (1999) ‘The Marijuana Legalization Debate: is There a Middle Ground’. In JA Inciardi (ed), The Drug Legalization Debate.  Sage Publications. Ferguson, D.M.. & L.J. Horwood (2000) ‘Does Cannabis Use Encourage Other Forms of Illicit Drug Use?’, Addiction, 95(4): 505-520. Gerber, R.J. (2004) ‘History of Demonizing Drugs’.  In Legalizing Marijuana: Drug Policy Reform and Prohibition Politics, Westport, CT: Praeger, pp. 1-16. Hall, W. (1997) ‘The Recent Australian Debate About the Prohibition on Cannabis Use’, Addiction, 92(9): 1109-1115. Hall, W. (1998) ‘Cannabis Use and Psychosis’, Drug and Alcohol Review, 17: 433-444. Hall, W. & R.L. Pacula (2003) ‘Policy Alternatives’.  In Cannabis Use and Dependence: Public Health and Public Policy, Cambridge: Cambridge University Press, pp. 183-226. Himmelstein, J.L. (1983) ‘From Killer Weed to Drop Out Drug’, Contemporary Crises, 7(1): 13-38. Sarre, R. (1990) ‘A Review of the Cannabis Expiation Notice Scheme in South Australia: Research Note’, Australian and New Zealand Journal of Criminology, 299-303. MacCoun R.J. and P. Reuter Drug War 'Heresies: Learning from Other Vices, Times, & Places', Cambridge, Cambridge University Press. McGeorge, J. & C.K. Aitken (1997) ‘Effects of Cannabis Decriminalization in the Australian Capital Territory on......

Words: 2135 - Pages: 9

Government Intervention

...effectiveness of government subsidies. This paper will discuss an industry that is subsidized by the U.S. government and address the following: why the U.S. government subsidizes the industry, how the subsidy alters the market outcome, who gains and who loses from the government intervention, any beggar-thy-neighbor issues, and why the subsidy is or is not justified. Introduction Many industries rely on government assistance in both good times and bad. “The potential micro and macro failures of the marketplace provide specific justifications for government intervention” (Schiller, 2010). Government interventions “encompass a wide range of regulatory, fiscal, tax, and legal actions that modify the rights and responsibilities of various parties in society. Interventions can increase or decrease costs to particular groups, effectively acting either as a subsidy or as a tax” (Subsidies and Market Interventions, 2013). Since the 1930’s the government’s role has assumed more responsibilities including “maintaining macroeconomic stability, protecting the environment, and safeguarding the public’s health” (Schiller, 2010). Government Intervention A government subsidy is defined as “monetary assistance granted by a government to a person or group in support of an enterprise regarded as being in the public interest” (Subsidy, 2013). An example of an industry that is subsidized by the U.S. government is the energy market, specifically related to the costs of fuel. Government......

Words: 906 - Pages: 4

Advantages and Disadvantages of Official Statistics

...Assess the Advantages and Disadvantages of Official Statistics Official statistics are quantitative data produced by local and national government bodies, and can cover a wide range of behaviour including births, deaths, marriages and divorce, income, crime, and work and leisure. Official statistics can be produced as a by-product of the normal workings of a government department, but they can also result from research designed specifically to produce them. Two main sources of official statistics are the government and its departments, and surveys. For example, government departments such as the Home Office and Education and Skills request; process and then publish information from organisations such as local tax offices, social services and hospitals. An example of a source of surveys that produce official statistics is The Office for National Statistics, which is a government agency and is responsible for compiling and analysing statistics. Every ten years this agency carries out the Census of the Population, which covers every household in the UK. By law each head of household must complete a questionnaire that includes family composition, housing occupation, transport and leisure. Official statistics are used by sociologists because of their many advantages. A main plus is that official statistics are often compiled from data which has been gathered from a large sample size. The majority of sociologists could probably not afford to carry out such vast research. The......

Words: 1129 - Pages: 5

Advantage and Disadvantages

...Street Private Bag X895 Pretoria 0001 South Africa Tel: +27 12 357 3000 Fax: +27 12 323 0601 120 Plein Street Private Bag X9023 Cape Town 8000 South Africa Tel: +27 21 465 1701 Fax: +27 21 461 8110 Website: http://www.education.gov.za © 2011 department of Basic education isBn: 978-1-4315-0578-4 Design and Layout by: Ndabase Printing Solution Printed by: Government Printing Works CURRICULUM AND ASSESSMENT POLICY STATEMENT (CAPS) LIFE SCIENCES GRADES 10-12 FOREWORD by thE ministER Our national curriculum is the culmination of our efforts over a period of seventeen years to transform the curriculum bequeathed to us by apartheid. From the start of democracy we have built our curriculum on the values that inspired our Constitution (Act 108 of 1996). the Preamble to the Constitution states that the aims of the Constitution are to: • heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights; improve the quality of life of all citizens and free the potential of each person; lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law; and • • • build a united and democratic South Africa able to take its rightful place as a sovereign state in the family of nations. Education and the curriculum have an important role to play in realising these aims. in 1997 we introduced outcomes-based......

Words: 21816 - Pages: 88

Government Intervention

...Intervention from Governments can occur in many ways and also for many reasons. The main reasons for policy intervention are; to correct for market failure, to achieve a more equitable distribution of income and wealth and to improve the performance of the economy. When we have to evaluate the effects of the legislations put in place by the government it is important to consider the type of legislation implemented, its size and also the type of market that it is placed into as there will be different benefits and drawbacks for every business. That is why one of the most important factors to consider is the people who are being impacted within the business to see whether the government legislation is desirable. Regulation may be used to introduce fresh competition into a market. When a new business (competitor) enters a market, which may already contain businesses with high market share it can be extremely hard to attract and keep consumers. In order to provide opportunity and a chance to new businesses the government will help them for example breaking up the existing monopoly power of a service provider. An example of this is the attempt to introduce more competition for British Telecom, with businesses such as talktalk, Sky and plus net. This is known as market liberalisation. Here it shows it depends on which business in the market to see whether it does provide a level playing field and if it is desirable. For the new businesses this intervention from the government is......

Words: 692 - Pages: 3

The Advantages and Disadvantages of Compulsory Education.

...The Advantages and Disadvantages of Compulsory Education. Over the course of history the purpose and definition of compulsory education has changed many times; from being a part of the American dream to being a political tool, compulsory always seems to change with the times. At its best compulsory education provided valuable services to children and families that added value to their lives. At its worst it compulsory education would ensure that education would be devoid of religious or political influence that immigrants would bring with them from their home countries. Today compulsory education appears to be a crutch that removes the accountability of parents for providing a strong educational foundation for their children. To determine which outweighs the other we must not only define compulsory education. We must also determine its purpose. Today compulsory education is defined as “…a period of educational attendance required of all students. The period of compulsory education is often determined by the student’s age. In the U.S., schooling is compulsory for all children. The age range for which school attendance is required varies from state to state. Some states allow students to leave school between the ages of 14–17 before finishing high school only with parental permission. In some other states, students are required to stay in school until age 18.” (US Legal Definitions) The original on the other hand definition is somewhat elusive; in researching the......

Words: 1065 - Pages: 5

Using Named Examples Assess the Advantages and Disadvantages of Contrasting Ways of Measuring Development

...changed or made better in an attempt to improve the overall environment. GDP is an indicator of development used by many people. The advantages of using GDP are that it gives one single clear figure, which is easily presentable. The fact it is a single figure also makes is very easily comparable when measuring countries against each other. Disadvantages of using GDP as a measure of development include, the fact that GDP does not take disparity in incomes between the rich and poor into account, therefore you could have the richest 1% of a population earning 99% of the wealth and GDP would not show this. GDP does not measure the sustainability of growth, for example, a country may achieve a temporarily high GDP by over-exploiting natural resources or by misallocating investment. HDI is another indicator of development. There is widespread use of HDI to compare development levels and it does reveal clear global patterns. Advantages are things such as, it does not solely concentrate on economic development, and takes into consideration that there are other, more social, ways to measure human development. It shows that an increase in education and health shows can see improvement in a countries infrastructure. The success of government policy can also be seen because if education and health levels are high the policies are likely to be working. Disadvantages could be, data from some developing countries may not be very reliable and may be difficult to confirm. The measures......

Words: 290 - Pages: 2

Government Intervention

...The conflicting ideologies of government intervention vs. no government intervention in the economy is an argument that has been going since the very inception of this country. Many of the principles are government is based on embody the ideal of a autonomous free market. However, as we have seen not only in this economy but around the world, there really is no such thing as a free market. The government is in some capacity always involved in the economy, whether it be an extreme case like a communist country or to a lesser extent like in a republic. This is why I believe it is a fallacy to even consider a world with a totally free market because this ideal is impossible to completely achieve. Even in our 'capitalist' country, our government implements and has implemented many socialist and fascist-like safe guards and policies within our economy. Whether it be the new deal, bailouts, tax breaks or even helping to establish a post office, the government is very much involved with the economy. And this isn't to say this is a bad thing. Like all things, there are positives and negatives with government involvement in the economy. However, since it is America, there is a stigma with suggesting that our government should head towards a more fascist or socialistic approach to the economy. Maybe in a perfect world a free market would work great. However, if you say that, you must also admit that in a perfect world communism would be great too. What I am trying to say is that both......

Words: 785 - Pages: 4

Government Interventions and Their Effects on Economic Inequality

...Government interventions and their effects on economic inequality Maastricht University | | | | School of Business & Economics | | | | Place & date: | 18th November 2014 | | Name, initials: | Große Entrup, Carina | | ID number: | I6096321 | | Study: | International Business | | Course code: | ebc1009 | | Group number: | 46 | | Tutor name: | Emre Ergin | | Writing tutor name: | Kirsty Donald | | Writing assignment: | Main Paper (Task 10) | | number of words: | 1990 | | carina.grosseentrup@maastrichtuniversity.nl Table of Contents 1. Introduction 2. Government intervention 3. Government intervention to reduce income inequality 3.1 In-kind transfers 3.2 Minimum wage 3.2.1 Effects of minimum wage on labour market 3.3 Income tax 4. Conclusion 1. Introduction Although income grew by almost three percent per year for all income classes in the period from 1950 to 1980, the ones that were mostly blessed with the highest income growth were the top earners (McDowell, 2012). Income can differ enormously between the different classes of a society and the range between the top earners and those at the bottom of the society becomes larger and larger. Income inequality is a wide discussed topic by all social classes. The well earning upper-class, people who have to struggle with a minimum living wage and the shrinking middle-class, which has to worry most about its future living situation, are......

Words: 2340 - Pages: 10

Disadvantages of Monopoly

...Disadvantages 1. Exploitation of consumers- a monopoly market is best known for consumer exploitation. There are indeed no competing products and as a result the consumer gets a raw deal in terms of quantity, quality and pricing. The firm may find it easy to produce inferior or substandard goods if it wishes because t the end of the day they know very well that the items will be purchased as there are no competing products for the already available market. 2. Dissatisfied consumers- consumers get a raw deal from a monopoly market because quality will be compromised. Therefore it is not a wonder to see very dissatisfied consumers who often complain about the firm’s products 3. Higher prices- no competition in the market means absence of such things as price wars that may have benefited the consumer and as a result of this monopoly firms tend to charge higher prices on goods and services hence inconveniencing the buyer. 4. Price discrimination- monopoly firms are also sometimes known for practicing price discrimination where they charge different prices on the same product for different consumers. 5. Inferior goods and services- competition is minimal or totally absent and as such the monopoly firm may willingly produce inferior goods and services because after all they know the goods will not fail to sell. 1st Disadvantages of Monopoly – Lower quality at higher prices Companies having monopoly over a product are bound to take advantage of the fact that the consumers......

Words: 544 - Pages: 3

Advantages &Disadvantages

...Advantages and Disadvantages of Convention and Concept Advantages of accounting concepts, conventions and regulations. There are many advantages that accounting concepts have on financial statements. Four important accounting concepts that underpin the preparation of any sets of accounts one of which is going concern that helps an account to assume for any future problems that occur in a business. This helps companies to make future plans and gives them time to gather money to sort out any financial problems. Consistency also has an advantage in helping in accounting by users of accounts can make more meaningful comparisons of financial performance. Prudence helps investors sort out financial performance such as future problems and cost of the business before recognising any signs of profits. Accruals also help financial data to be useful for users by all business revenues and cost are recorded in the appropriate statements and at the appropriate time. Conventions also have many advantages in influences financial statements to be useful for investors. Separate entity is one example this convention seeks to ensure that all private transactions and matters relating to the owners are segregated from transactions that relate to the business. This is an advantage because owner’s transactions are kept private. Also they are not mixed with the business finance so that users can clearly see the business financial state. Also materiality is also an important convention in a......

Words: 327 - Pages: 2

Government Intervention

...Greenfield investment a new wholly owned subsidiary. We have planned to establish physical intensive plants. This strategy is established because there are fewer competitors, competitive advantages that comprises of implanted competencies, skills, routines and culture. Drawback: As we are exporting to a new wholly owned subsidiary, there may have been a matter of concerned about transportation costs and uncertain political involvement, which can be resolved or minimize through government integration. The choice of Egypt market: * Egypt is politically steady. * Egypt has free market system. * Egypt has comparatively low inflation rates. * Egypt has fewer competitors on this particular sector. The choice of timing of entry: As our firm enters the markets after related firms have already established themselves in the market, as an effect we are avoiding the pioneering cost. Other firms’ failure in this sector will help us to reconstruct the reputation. Scale of Market entry: Entering the Egypt market on a substantial scale is a worth strategic pledge that makes the competitive stage more challenging. (Wholly Owned Subsidiary) * It reduces the risk of losing control over core competencies. * Our core competencies are our competitive advantage on our management. It reduces the risk of losing control over management and brand name stays significant. * It will allow our firm to attain location and scale economies and......

Words: 415 - Pages: 2

Company Strategies and Government Intervention

...Company Strategies and Government Intervention When a business is forming or for one that has been in existence for some time, there are a variety of considerations to be taken into account in order to be competitive within the particular arena for which the business focuses on. This could either be service or product. The product may be sold through the business or the business is producing the product. In any given situation, the business must choose a strategic path to follow that draws in customers and keeps customers loyal. The business professionals within the business must make two kinds of decisions – strategic decisions and tactical decisions (Martiocchia, 2013). Within the strategic decision making process, the decision makers must consider low-cost strategy or differentiation strategy in addition to various governmental laws, in order to remain competitive within the given market. Scilly (2014) indicates that when it comes to marketing a business, there are three generic strategies that include focus, differentiation and cost leadership. The lowest-cost strategy, or cost leadership strategy can be very successful but also more difficult to employ (Scilly, 2014). When a business is using the lowest-cost strategy the business is marketing their products or services at the lowest cost as compared to the competitor. This means that the business would need to minimize all costs and expenses of the business in order to pass on the savings to the customer (Scilly,......

Words: 1808 - Pages: 8