Monopolies Effect on Resource Allocation in Industry :: essays research papers

Monopolies ar under constant critics from the public and other producers of world polutive, straining to competition and they are accused of worsening resource allocation. Whether this is sure or not, depends on the specific company, but certain characteristics are possible to define. It is these I will describe in the following, and hence conclude if monopolies worsen or improve resource allocation. It is great to distinguish between competition and monopoly before describing advantages and disadvantages of both. Many monopolies are government own. This means that the incentive to strive for more profit, disclose conditions etc. is gone. This is due to the fact that, if there is a loss, the government will cover it, and government owned companies seldom strive to achieve maximum profits. A lot of the characteristics are also seen in privately owned monopolizing firms. When they become so big, that competition is practically gone, the incentive to make even more profits, and be ing innovative diminishes. In a competitive industry this is not the case. The fear of loosing your job, not being able to compete, your products becoming obsolete etc. are important factors, which stimulate productivity. It is therefor obvious that the competitive industry will try harder to allocate their resources in the most efficient way. To land, the external costs in a competitive industry will often be pollution, seeing that the firm will strive hard to diminish their costs resulting in the firm ignoring unnecessary costs. The monopoly owned by the government, would never be able to ignore such a serious matter, and they would have to pay the costs. A monopoly would also have to be thrifty not to damage its image, seeing that is, in many cases, already is unpopular. Capital, on the other hand, is often to the benefit of a monopoly, since they produce at a cosmic scale. To fully utilize capital, a lot of labour is needed, labour which a monopoly is expected to have, and a s maller competitive firm may lack. For example, a clap furnace might need a crew of 24 men working night and day, to fully utilize it. The monopolizing company may be able to bear the men, but the smaller firm might not have the money to hire all the 24 men at night, seeing wages are much higher at then. The question then is if the competitive company is so much more efficient due to hard work, that they still enkindle produce more than the monopoly.