Why might a government be concerned at the activities of a monopolist

INTRODUCTION

The government of a state has a contractual binding to provide security and fend for its citizens in return for their civic duties and responsibilities . The Pareto optimality defines an optimal distribution of benefit to the society as the distribution of goods in such a way that no one could be better- off without making anyone else worse - off So it becomes the responsibilities of government of a state to fashion out policies that would be beneficial to its citizens . Since regulatory function is a key function to government the control

of means of production , especially key industries that constitute the commanding height of the economy , becomes necessary . This is so , in to make the provision of essential social services such as electricity , seaport services , rail transportation , water provision , etc , adequately distributed among the different strata of the society . This has made some state government to take the monopoly of providing these services by establishing parastatals and other corporations with exclusive monopoly in the provision of such services

WHY IS GOVERNMENT CONCERNED WITH THE ACTIVITES OF A MONOPOLIST

A monopolist is a producer or seller of a particular goods or service with the sole right to operate in this area of the economy sector Others are by law have no right to venture into this area of operation where this monopolist operates . Thus , the monopolist has control over its output and price . This position him to fix its price at any level that can sometimes be exorbitant and exploitative to the consumers Also , the output and supply of goods and services can be cut short by the monopolist in to increase its price and income . Since there is no competition from other competitors , the monopolist tend to be very powerful the judge in its own case . It becomes necessary that government consistently check and regulate the activities of the monopolist , so as to safeguard the ordinary citizens from excessive exploitation and unnecessary hack in prices . Also , the quality of goods and services provision need to be checked in regular interval so as to make the consumer get the money worth of what they are paying for MC

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The above graph shows the monopolist in this production operation has a limited competition . As a result , there is very little competition in this industry . The overarching point though , is that no matter what the source of monopoly power , whether it stems from patents , knowledge or as in this case , high fixed costs , it is a fact of economic life

REMEDIAL POLICIES THAT CAN BE CONSIDERED BY THE GOVERNMENT

In to check against the negative side associated with the activities of a monopolist , government can adopt other remedial public policies . Among these , is the privatization of government corporations that operate as a monopoly ? By privatization , private individual and bodies are given the opportunity to own part or whole of the government company by buying shares or taking over the operations of some specific function of the corporation...