Monopolies detrimental to the public

When a company is free to determine their own prices because of monopolies this production could be detrimental to the public. Because the price that generates the highest return for a monopolies may not be achieved if there is free competition.
With the existence of monopoly pricing production free themselves in order to dredge the profit margin then the public will be harmed. Especially when it happens to the type of production of essential goods needed community.

It can be seen clearly if we look at figures such as demand for apple production and calculate the revenue that will go into the pockets of farmers at any price

table price

From the table above we see how, if there is a common condition of bidding, apples will be sold at the equilibrium price of $ 0.4 to apples sold as many as 600. Farmers will collect revenue total of $ 2.4. Now you can see from the table that if any farmer can maintain prices at the $ 0.8 they will receive revenue of $ 3.2. This is an encouraging improvement. There would be no point if only one farmer who raised the price to $ 0.8 it will lose the business by other farmers. But if only they could form a monopoly! There will be a huge temptation for farmers to try to buy rival of or all the farmers get together and agree not to sell below the price of apples $ 0.8 (they can achieve the same effect to agree to produce 400 apples and let demand drive prices up to $ 0, 8, at the market price of a "clean"). Then all the farmers will benefit great and even without taking into account cost savings arising from the resulting lebis little apples.

This reasoning is the background of all the marketing board's decision. Reasoning is precisely what provides the motivation for agencies such as the OPEC oil producers' cartel. In the 1950s and 1960s, the various competing oil-producing countries and oil prices were low. Then in 1973, they finally managed to unite effectively to regulate the supply of oil. Only a short time oil prices jumped four-fold and the OPEC member states began to make profits piled up. They go back to doing things that are very similar in 1979. This is a valuable lesson about how strong monopoly.

One other group since the beginning of studying the formation of monopoly is the workers who organize themselves in unions. Under capitalism sebilan twelfth century, many workers are offered in connection with the increase of population, labor flow is no longer needed on farms, due to the engine which reduces human labor. Demand for labor is limited. Actually Kar Marx]claim that it happens with intentional because it fits with the wishes of the state of the capitalist to have a bunch of unemployed as a backup. Thus employed can be controlled with the threat bahawa they will be replaced with those of a group of unemployed that. As a result, salaries are up to the labor market is very low. Therefore, the workers form a union in an effort to limit the supply of workers to their jobs. If successful, they can increase their salary.

One of the strongest feature of modern western economies is the emergence of a growing company. They enjoy the freedom to substantial levels in determining the price. Without worrying too competitive or labor. Furthermore, farmers and other producer groups successfully pressured the government to buy their products with a fixed price above the market price. As noted by other leading economic expert, Kenneth Galbraith: "For individuals, the market is a threat, force an unpleasant and arbitrarily determining the income or the price. The greatest effort is trying to extricate themselves from the tyranny of market prices or wages "He and many other economists are encouraged to question whether the emphasis on the role of textbooks in the market pricing is not out of date and does most of the producers rather than" determine the price "rather than" receiving price ". This has important consequences, especially for a government faced with the problem to control inflation, as will be discussed in the post inflationary

 

Reference:

JK. Galbraith and N Salingger, Almost Everyone’s Guide to Economics, Houghton Mifflin, Boston, Mass, 1978, page 40.