Monopoly Services by State-Free-Samples-Myassignementhelp.com

Question: Discuss about the Monopoly Services by State. Answer: Monopoly is a market where there is only single seller in the market and no close substitute for the product or service is available in the market. Monopolist can charge any price whatever they want as they are the single source of the particular product or service. In monopoly market, there are barriers in entry of firm, barriers like natural barriers, artificial barriers 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 economic advantage of such state monopolies is that, they help to keep costs low of products and services by using the concept of economies of scale, and provide services which are widely approachable to the general public. They are not affected by market constraints, which helps keep out price rise. Such firms become monopoly because of their size and nature of business. And monopolies of these existing firms make troublesome task for the new firms to enter in the market. These industries incur high fixed cost for example internet services, railways (The state and its monopolies, 1976). In monopoly, seller earns the abnormal profits in the long run. As he is the only seller with no close substitutes available in the market so consumers dont have choice they have to purchase that product or service only(Korbinian Neubert, 2015) In certain cases Government has the only license to produce that particular goods and services. For example, when national railways transportation is created by the government, in most cases they are permitted the freedom on the functioning of passenger trains in the country. The political argument for nationalisation of industry is that the services given to all sector should be given uniformly. As seller (government) fixes the prices or cost of that particular product or services and becomes the price maker so can charge any price from consumers. In monopoly market, there is use of price discrimination which provide add on advantage to low income group of society as they provide inexpensive services to them. For example, railways, posts and transport in remote areas. In monopoly, seller earns the abnormal profits in the long run. As he is the only seller with no close substitutes available in the market so consumers dont have choice they have to purchase that product or service only(Korbinian Neubert, 2015). Government use monopoly right for assuring better quality and safety of goods and services to the society. For assurance of good quality and safety government also grants rights in the form of patents, which provide company to come up with new and exclusive product and services. In some countries, rights have been given to companies to produce a particular goods and services. The reason behind doing this is to encourage companies to invest more funds in research and development of new products. This can be concluded that state enjoys the monopoly market and uses economies of scale in their operations and from these earning abnormal profits in the long run period. By earning more state tries to invest more amounts in the research and development of a service. In monopoly, seller (government) uses the concept of price discrimination and tries to reduce the inequalities in the weaker section of society and also try to give assurance of safety and quality services to the society. Bibliography The state and its monopolies. (1976, November 27). Advantages And Disadvantages Of A Monopoly Market. (2011, September 12). Retrieved March 20, 2018, from toughnickel: https://toughnickel.com/business/Advantages-And-Disadvantages-Of-A-Monopoly-Market Buzzle. (n.d.). Retrieved from https://www.buzzle.com/articles/understanding-government-monopoly-with-examples.html Korbinian , K. v., Neubert, M. (2015, March 15). Monopoly Profit Maximization: Success and Economic Principles. MCKENZIE, R. B. (n.d.). In Defense of Monopoly. Stigler, G. J. (1983). The Economists and the Problem of Monopoly.