2.- Monopoly regulation
Due to the market power monopoly has, it can set a price above its marginal cost of production, and so earn large economic price as it shows in the graph, (Economics on line).
The natural monopolist will charge Q and make super-normal profits, which could be excessive. So, the regulator must take actions to avoid this situation.
Pettinger (2010) explained the several ways the government can regulate monopolies:
1. Price capping by regulators
For many newly privatise industries, the government create regulatory bodies such as:
OFGEM - gas and electricity markets
OFGEM could limit price increases, with a formula RPI-X, being X the amount which they have to cut prices relative to the inflation. If for example RPI is 3% and X 1% the maximum level the utilities could increase price is 3%- 1% = 2%
In the last year in U.K. there have being a fierce pressure to apply a wide-ranging price cap on energy bills, which will be analysed
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(Pettinger T., 2010)
A) RPI- X regulation. (used in the energy sector)
Advantages:
1- The regulator can set price increase based on the state of the industry and potential efficiency savings.
2- Incentive to cut costs
Disadvantages:
1- Danger of regulatory capture, poor oversight of the companies regulated
2- Regulators could be very strict and don´t allow the companies making enough profits.
B) RPI+/- K for water industry Being K the amount of investment that the water firm have to implement.
The main problem in regulation is the regulatory capture – regulators are dependent on the utilities for the information on costs, and end up being overly sympathetic to those utilities. (Tarrant R., 2016).
The Commons ‘Public Account Committee (PAC) has criticised the UK water regulator for poor oversight of water companies, which have made gains of at least 1.2 billion pounds between 2010 and 2015 higher than
9. Lastly there is the Fixed price 2015 service that helps customers secure their energy prices for the next 5years, and is said to be the longest fixed price tariff in the UK and is also available for a limited period.
Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open to competition for market share to begin. In terms of regulation of monopoly, the government attempts to prevent operations that are against the public interest, call anti-competitive practices. Likewise, oligopoly is a market condition where there are minimal distributors that have a major influence on prices and other market factors. This causes market failure, especially if evidence of collusive behavior by dominant businesses is found.
Finally is the allowance of these monopolies to rise in the first place. Since there were no regulatory agencies back in the second industrial revolution, big businessmen with the idea of trimming fat in their companies could conquer any competitor by using hardball tactics of purposely
Hint : Typically, in a monopolistic competition industry, if one company increases price, the other company also increases their price to make more revenue in the long term.
In Document 4 “A Call to Action,” by James B. Weaver, it explained to the public through the author's thoughts of that monopolies had too much power and that the monopolies destroy competition and trade. This book was written at the time of when big corporations were taking over and destroying competition. Also, the author goes into detail that they control the price of the raw material, so they can produce their products at a low price and sell it at a low price. By selling that the lowest price, the competitors can not compete are driven out of business or reduce the wages of the workers. This idea can be related to current times were big corporations, such as Walmart, are destroying competition because they lower their prices that the competitors cannot compete with.
The purpose of antitrust policy is to promote competition, which leads to lower prices. If a company had the power of price control that comes with being a monopoly, they would profit by picking the quantity/price that equals the highest revenue for their company. This would be likely a lower quantity and higher price than would prevail if there was competition.
There have been positive attributes from the regulations. One of the positive effects on businesses is that enhanced environmental security has allowed for more investors to start trade in the regions with effective regulatory measures. This is because increased regulatory measures have resulted in the investors gaining not only positive returns, but also consumer trust due to their compliance (Lieberman, 2010). Therefore, there has been significant growth in investment; however, the negative influences have managed to cover these positive influences. The government has also managed to generate substantial amounts of money from the charges and used them in establishing a friendly environment for other potential investors.
A monopoly is advantageous to the society and is encourages by the government if there are high fixed costs and very strong economies of scale. At the same time, it could also lead to unequal distribution of wealth; containment of consumer choice; lobbying and unethical spending.
Their (Woodson’s) focus on using hard data to measure performance for all their initiatives is not consistent with the school district culture. (Robbins 629)
In oligopoly market, each firm has substantial market power with high degree of interdependence. The key for success in a oligopoly market is to gain more market share than the competitors. Increasing the price can lead to loss of market share to the competitors, so in the oligopoly market, if a firm decreases the price, the other firms will always follow, but if a firm increase the price, the other firms will not follow. The demand curve is kinked.
What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.
In this country we use animals for all sorts of uses, whether that has to do with medical testing or the other countless uses. But there has always been question’s when It comes to the human thought process is whether or not the animals are suffering? The way that I look at the correlation between humans and animals. I believe this reasoning can be acceptable because if a human steps on the tail of a dog, or brands a horse or a cow, these animals are suffering. They are in pain and they try to avoid these situations but this leads to more pain and suffering. But if someone in this country was being treated this way and was publicly documented, then there would be an uprising, if not a jail sentence or a death penalty. Or when it comes to the interests of the animals, as a human being who is given the moral capacity to weigh decisions between right and wrong is a human right. But we are obligated to take every things best interests in to account, whether that is a human or an animal. These interests are what help us make the most correct decision between animals because if we aren’t taking into full account of a situation that could possibly put harm or suffering to an animal is where we think about these interests. It’s hard to think about because humans are inclined to think what is best for them, while not taking into account of the others interests.
Policymakers can take certain steps to regulate and break up a monopoly if an abuse of power is taking place and individual governments determine what steps should be taken should a violation occur. Because monopolies have the market power to set prices higher than in competitive markets, the government can regulate pricing through a price cap, yardstick competition and by the prevention of the growth of monopoly
have more “pricing power” than when demand is much weaker and falling (e.g. during a recession).
Depression is serious and, if left untreated, can worsen to the point of becoming life-threatening. If depressed teens refuse treatment, it may be necessary for family members or other concerned adults to seek professional advice.