The Pros And Cons Of 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
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