The Pros And Cons Of Natural Monopolies

The government decides the amount of production and usage that they want which means that the goods and services can be produced in the quantities the government thinks best for the society. Government has the rights to change the price of goods and services. This means that where the production is controlled by a monopoly, customers will not be charged at higher prices in order for the monopoly to obtain higher profits. However one of the disadvantages of this economy is that there is no freedom of choice for producers or consumers. Hence, lack of incentives for workers resulting in low efficiency.

Similar products also creates it to where firms are price takers because they have no control over the price set by the market. Similar

The business has all the control. They can set the price as high as they want since they have no competitors, give the workers low wedges, more work time, and have poor working conditions. I believe that the government should break up Standard Oil’s monopoly. A monopoly is bad for the economy. A business has control of many other companies.

A free market system only hurts the economy, which is why the U.S is a mixed market economy. A mixed market economy is beneficial to consumers due to the fact there is government regulatory oversight of goods, and there is competition for goods. This type of economy means that companies cannot become monopolies and control prices of certain goods. However, this is not the case for pharmaceutical industries because there is little to none government intervention occurring. The lack of government oversight means that pharmacies that only develop specialized medicines have complete control of the price due to the fact they are the only ones able to reproduce the product.

The second case – controlling the market – is where the contrast between small firms and big business contrasts is most evident. The small firm lacks the capacity to influence prices, as both their market share and purchasing power are limited; however, big business possesses an abundance of both. Big business is able to exert their power by influencing prices because their decision to buy can be the difference between survival and failure for suppliers. Furthermore, Galbraith (1967, 30) suggests that the influence of size enables firms not only to control price but also quantity sold. Although Galbraith acknowledges that influence on demand is inexact; One should not discount its importance.

When there is a large number of sellers and a large number of buyers in a market, that market is regarded as a perfectly competitive market or industry. In a perfectly competitive market, a single firm cannot dictate the pace and the selling price (Khan Academy, n.d.). In other words, one firm cannot set the prices and the competitors are obligated to market prices. What is fascinating about a perfectly competitive industry is that barriers that prevent new firms from entering the industry are flexible; that means, there are minor barriers of entry as well as little or no barriers to exit (Rittenberg & Tregarthen, 2009). In view of this, the following items will be classified as a perfectly competitive market and a non-perfectly competitive market.

This means that the limited partners have no management authority, and (unless they obligate themselves by a separate contract such as a guaranty) are not liable for the debts of the partnership. The limited partnership provides the limited partners a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General Partners thus bear more economic risk than do limited partners, and in cases of financial loss, the GPs will be the ones which are personally liable. Limited partners are subject to the same alter-ego piercing theories as corporate shareholders. However, it is more difficult to pierce the limited partnership veil because limited partnerships do not have many formalities to maintain.

It is based on the concept of supply and demand. Firms or individuals make their own choices about - i) what to produce, ii) how to produce, and iii) for whom to produce. Producers aim to seek highest profit margins. Price rises if there is a shortage of goods and reduces if there is a surplus. Role of government in market economy: - There is very little or no government involvement in market economy.

Introduction The minimum wage is the lowest amount of compensation an employee must receive for performing labour. It is a price floor below which the market price may not fall and to be effective has to be set above the equilibrium price. Minimum wages are established by contracts or legislation by government. It is therefore illegal to pay an employee less than the minimum wage. The supporters of minimum wage say it increases the standard of living, reduce poverty, reduce inequality and boost morale while the opponents say the exact opposite.

Individuals within the society invest their funds in the economy in order to generate money. The main objective of capitalism is to make a profit for the owners, which are private individuals. This economic system differs from others with regard to the fact that there is no government intervention, the term used is Laissez-faire, meaning individuals are free to determine what products to produce, to whom these products will be sold to as well as the pricing of these products. (Scott, 2009).

I do not believe the government should raise the minimum wage. Wages stand where they are in result of the employees being low skilled and the market value of what is produced. As shown in the graph below, the government finds an average of supply and demand of the labor and decides an equilibrium price. At this point they would not have more workers necessary, which would be a surplus or a lack of workers, which would be a shortage. If a company pays workers more than what they are valued for, the firm will not stand a chance of survival against its competitors.