Monopolies and the Telecommunications Industry - 0...

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0MONOPOLIES AND THE TELECOMMUNICATIONS INDUSTRYNameProfessorCourseDate
1Monopolies and the Telecommunications IndustryA monopoly that is owned, controlled and managed by the government allows maximumbenefits to a consumer even much more that a competitive firm may be able to provide. This isbecause the government may not harbor any intent to earn profit. As a result, it would provide agood even when there is no profit at a very low price so that the good remains available to theconsumer. One such example is telecommunications industry, which is a necessity since thegovernment is selfless in its provision to consumer, consumers tend to benefit in terms of pricesand availability. The government will also try to minimize prices for the consumer, and ifnecessary, cover the loss of doing so. Moreover there are goods such as social goods that a firmfrom the private sector is not interested in providing for the reason that they do not generate aprofit. In such a case a government would readily provide it even at a loss.However the monopolies controlled by the private sector have relatively less benefits.The only reason such a firm may reduce its prices, increase the quality or replace the productwith a better one is a probability that other firms may exploit the loss of customers if the firmdoes not do the things mentioned above. This would result in entry of other firms and loss ofmonopoly power. Therefore a firm may benefit the consumer by reducing prices or improvingquality in order to maintain monopoly power. Disadvantages of a monopoly are very obvious.These include unreasonable prices, low quality and general exploitation of consumers withperiodic increase in prices because the consumer has other choice. Lack of innovation is anotherdisadvantage due to the lack of incentive to improve.The need to regulate monopoly arises because the single firm has more chances to exploitthe monopoly by charging as much price to its customer as they can. This can be done becausethe firm realizes the fact that they are the “only” supplier of the product in the market and the
2customer has no other choice but, to buy the product at the stated price. It is the responsibility ofthe governments to restrict these sorts of monopolies through laws and regulations. The goal ofthese laws should be to protect its customers at the same time allowing the firm to operate at

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Term
Spring
Professor
llaynehage
Tags
Economics, Monopoly, Perfect Competition, SBC communications

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