Competition. Monopoly and the state in a market economy. Criteria for monopoly power (most important)

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Competition. Monopoly and the state in a market economy. Criteria for monopoly power (most important)

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15. Monopoly and the state in a market economy. Criteria for monopoly power

Monopoly - large economic associations (cartels, syndicates, trusts, concerns, etc.) that are privately owned and exercise control over industries, markets and the economy based on a high degree of concentration of production and capital, in order to establish monopoly prices and extract monopoly profits . Therefore, there is a need for state intervention in the system of organization of monopolies in a market economy.

The formation and growth of monopolies are historically inextricably linked with the development of free competition capital into monopoly capitalism. In the field of economic relations, the capitalist growth of the monopolies has led to the strengthening of their dictate and domination, which the monopolies exert influence on. Monopolies, thanks to the high level of concentration of economic resources, create opportunities for accelerating technical progress.

Monopolies, having seized strong positions, sooner or later lose the dynamics of their development and efficiency, because the advantages of large-scale production are not absolute, they bring an increase in profitability only up to a certain point.

Pure monopoly, as well as perfect competition in a market economy, practically exclude their existence. due to two reasons:

1) there are practically no goods that have no analogues;

2) it is rare that there is only one seller in the national (or world) market. Although in more closed markets, for example, in a small town, we can observe the phenomenon of pure monopoly.

Maintaining a pure monopoly requires conditions that prevent new sellers from competing with the monopolist. A barrier to entry is a barrier that prevents new additional sellers from entering the market of a monopoly firm. Barriers to market entry are necessary to maintain a monopoly in the long run. So, if free entry to the market were possible, then the economic profits received by the monopolist would attract new sellers to the market, which means that the supply would increase. Monopoly control over prices would disappear altogether, as markets would eventually become competitive.

A firm has monopoly power if it can influence the price of its product by changing the quantity it is willing to sell. The degree of monopoly power depends on the presence of close analogues for its product and its share in this market. And the criteria for monopoly power and the activities of monopolies in the country as a whole are regulated and fully controlled by municipal authorities and government organizations.

Author: Ilyina V.N.

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