The Pros And Cons Of A Natural Monopoly

1470 Words 6 Pages
A Natural Monopoly

In Economics, a natural monopoly can be defined as an industry where the fixed cost

of the capital goods is so high that it is not profitable for a second firm to enter and
…show more content…
However, in some countries the government has tended not to do

this, and has sold shares to those employed in the industry. This clearly has a claim to

be better from achieving the best price for the assets increased.

The forth benefit is that the wider spread of wealth ownership takes place. The

long-term objective is to change attitudes to wealth creation through greater

individual ownership of capital. However, it is extremely difficult to prove whether

this has been happening actually.

Base on those arguments, privatization has resulted in the transfer of public sector

monopolies into private hands. Therefore, Attention must be focus on the control of

such industries, in order to avoid the exploitation of consumers. Nevertheless, there

has been a sharp increase in the number of industries where firms have the power to

exploit consumers.

In all above mentioned, there are no convincing economic reasons to maintain public



However, the reality is slight different. Though privatization can
…show more content…
The high profits of

monopolists may be considered as unfair, especially by completive firms, or anyone

on low incomes on this matter

In addition to these problems and large monopolies may be able to bring political

pressure and thereby get favourable treatment from government.


The most convincing reason for privatization seems to me to be the economic

argument. In public enterprises, the main objective for employees is to maximize their

own influence and their personal income. On the other hand, there is little or no risk to

loose one’s job, as the public owner of the enterprise will bear potential losses. The

incentive to produce in an efficient, cost minimizing attitude is rather low.

Additionally, there are no strong incentives to offer an attractive product or service to

the costumer, as this does not improve on the individual employee. It is true with

respect to innovation efforts. As a consequence, in many public firms cost is quite

high, and productivity of labor is rather low. Consumers are in a disadvantage place

Related Documents