Monopolies

[bluerev002]

Well, I guess this is the right place to put it.

When a company monopolizes and makes a great chain of themselves (by the way what is that called? to make a chain of your company- monopoly?)
does the goverment profite from it?

Ive never really thought it did, but if it doesnt why does it allow monopolizatoin to continue? Do they feed the govenors elections so he wont do anything against them?

[percept¡on]

Individual politicians might make money off of a monopoly in the form of kickbacks, but monopolies are known to be bad for a) the industry as a whole (decreased production of whatever commodity they monopolize) b) consumers (higher prices) and c) innovation and efficiency.

Since less revenue is generated as a result of the lowered production, less income taxes will be collected, and since less will be sold as a result of the higher price, less sales tax will be collected.

Even most free market libertarians support Anti-Trust legislation which make monopolization illegal, and the FBI and Justice Department routinely challenge real or perceived monopolies in court, recent examples being Microsoft and Staples/Office Depot.

[DaCuBaN]

hat is that called? to make a chain of your company

Generally franchise - you sell the name and the supplies to an individual who fancies himself as, for example, a McDonalds/Starbucks owner and so on.

There are wholly owned stores out there, though I can't think of an example at the moment.


Ive never really thought it did, but if it doesnt why does it allow monopolizatoin to continue? Do they feed the govenors elections so he wont do anything against them?

One of the reasons behind this is tax. Governments the world over that have a monetary economy vie with each other for big-business to site themselves in their nation. Think about it - a company with annual profits in the hundreds of millions will end up paying scores of millions in taxes, which the government can spend. It also helps their credibility as the most don't notice these taxes, but simply notice the effect the money that has been attained has on their lives - which could be quite profound.

Simply put, monopoly is good in the free market as it acts somewhat like a government run body - they can provide the government with a steady income in the form of taxation, as if they are the only people providing a service/goods that is/are necessary then everyone must use it, hence paying the tax.

This is just a legitimate reason - I'm sure if you want to be sceptical you could find plenty of evidence to show that indiviudals receive kickbacks and the like.

[percept¡on]

Originally posted by [email protected] 15 2004, 09:29 AM

One of the reasons behind this is tax. Governments the world over that have a monetary economy vie with each other for big-business to site themselves in their nation. Think about it - a company with annual profits in the hundreds of millions will end up paying scores of millions in taxes, which the government can spend. It also helps their credibility as the most don't notice these taxes, but simply notice the effect the money that has been attained has on their lives - which could be quite profound.

Simply put, monopoly is good in the free market as it acts somewhat like a government run body - they can provide the government with a steady income in the form of taxation, as if they are the only people providing a service/goods that is/are necessary then everyone must use it, hence paying the tax.

Not only is this contrary to reality, it flies in the face of logic.

Monopoly is BAD. And generally companies of that size and power have ways out of taxes. Monopolies decrease aggregate output, so less is generated and less taxes are paid, and less consumers' needs are met.

In a competitive market, each firm will produce until marginal cost (this is the supply curve) is equal to demand; in a monopoly, the firm restricts output to the point where marginal revenue (equal to exactly 1/2th the demand curve) equals marginal cost (thus giving them the highest profit margin possible, and then set the price at the demand level for that quantity.

since you prolly don't understand a word of that, look:

http://www.ryerson.ca/~ibryan/ecn104/wk10/img4.gif


Competitive market = Produce where S=MC intersects D, i.e. quantity Qpc at price Ppc.

Monopoly = Produces where S=MC intersects MR, i.e. quantity Qmon, which they sell for price Pmon

In other words, they produce less and sell it at a higher price, and guess who pockets the extra revenue? Hint: it ain't the government.

[DaCuBaN]

My apologies for the way I phrased it: I don't support monopolisation from private entities, nor do I believe them 'good' for the free economy.

What I meant was that in a free market economy a monopoly is a steady factor, something that can be relied upon by the state as a source of income, unlike smaller business that is far more likely to falter

Of course, the flipside is when these businesses do go sour, they have an even greater impact


Not only is this contrary to reality, it flies in the face of logic

I think not...


In a competitive market, each firm will produce until marginal cost (this is the supply curve) is equal to demand

Yes, economics 101 so far...


in a monopoly, the firm restricts output to the point where marginal revenue (equal to exactly 1/2th the demand curve) equals marginal cost (thus giving them the highest profit margin possible, and then set the price at the demand level for that quantity

Bear in mind what we are discussing is why this is good for the given state. More profits = more to tax. Higher sale value = higher sales tax. As far as the government are concerned, it's all good.


since you prolly don't understand a word of that, look:


Way to go treat me like a child asshole <_<


In other words, they produce less and sell it at a higher price, and guess who pockets the extra revenue? Hint: it ain&#39;t the government.

The government do get the extra revenue in the form of taxes - it is your income that has the biggest dent taken from it of any individual medium, and in the case of a corporate entity this becomes a substantial sum.


Monopoly is BAD. And generally companies of that size and power have ways out of taxes

We&#39;re arguing about from the perspective of a government, not the consumer. From a consumer point of view monopolisation is bad. As for the corruption aspect, did I not say...


I&#39;m sure if you want to be sceptical you could find plenty of evidence to show that indiviudals receive kickbacks and the like

So go jump on someone else :P :angry:

I mean good grief, if I was pro monopolisation I would&#39;ve been lynched in this place by now :rolleyes: ;)

[percept¡on]

Ok, if monopolies are so good from the government&#39;s point of view, show me an instance in which the gov&#39;t has encouraged monopolization.

[bluerev002]

thanks perception, I had to read your post many times to understand but I got it.

The only thing i was able to get out of the economics teacher is that monopolies are bad because they cut down competition and capitalism thrives on competition. Why this is so He didint answer but your explanation makes sense.

Thanks a lot

just out of curiosity what would an anti monopoliy bill be called?

Anti-Monopoly trust? Act? bill?

[DaCuBaN]

Ok, if monopolies are so good from the government&#39;s point of view, show me an instance in which the gov&#39;t has encouraged monopolization

Any instance where a government doesn&#39;t enact anti-trust regulations to tip the balance in favour of the &#39;small man&#39;. Laissez Faire although not actively promoting this will almost inevitably end up with monopolisation.


just out of curiosity what would an anti monopoliy bill be called?

anti-trust laws.