What is the monopoly?

Monopoly means supply by only one person or firm. It can exist only where the product being supplied has no close substitutes and the supplier, for some reason, is able to exclude other firms from producing it. It may arise in the following ways:

1. Personal supply by a specialist or talented individual. Examples are concert violinists, hair stylists, and fashion designers.

2. Supply under patent right or copyright. Legal force is given to the rights of inventors, authors and composers to enjoy for some period of time the fruits of their labours.

3. Natural monopolies: control of natural resources such as coal mines, oil wells or mineral deposits; or the control of expensive capital assets which it is socially undesirable to duplicate. It is uneconomic to take water into houses through several pipelines for the sake of competition in the industry, or to lay two railway lines between towns when one is adequate for the traffic.

4. Monopoly through the economics of scale. When a large-scale enterprise dominates an industry it is difficult for competitors to enter that industry, for to do so they must be comparable in scale with the efficient firm already established. From Adam Smith onwards classical economists have held that monopoly was prima facie bad, and the uncontrolled behavior of monopolists did much to support this view. The early canal and railway companies were notorious for their exploitation of the travelling and freight-forwarding public, and in more recent times when the first commercial television companies were formed in Great Britain extremely high returns on capital invested were achieved by some companies. The denigration of monopolists can be carried too far, however. Even if monopolists are in a position to exploit their monopoly, they do not always do so, and in most countries reasonable controls have effectively restrained those who do. The first thing to notice about monopolists is that they are subject to the authority of the consumers. A monopolist can dictate either price or quantity, but not both. One half of the decisions to be made will still rest with the consumer. Thus a monopolist who decides to produce a new type of family car may say that he is prepared to market it at a price of $8000.00. It will be up to the body of consumers to say how many they arc prepared to buy at that price. Alternatively, he may decide to make 100 000 models of the car. In that case consumer demand will decide what price to pay, let us imagine $5600.00. What the monopolist cannot usually do is say, 'I will make 100 000 cars and you will buy them at $8000.000'. He is still subject to the authority of the consumer, even if he is a monopolist. The exception to this rule is when the goods or services concerned have no close substitutes, and must be purchased by the consumers. (2855)

Notes

1. prima facie - (лат.) с первого взгляда

2. freight-forwarding - перевозка грузов, фрахт

3. tо be up to - зд. касается, относится к

4. is subject to –зависит от

5. economics of scale – преимущества крупных экономических объектов

6. denigration – клевета

Задание 1. Прочитайте и переведите текст.

Задание 2. Ответьте на следующие вопросы:

1. What does monopoly mean?

2. What do natural monopolies control?

3. When is it difficult for competitors to enter an industry?

4. What is the first thing to notice about monopolists?

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