Measures to control Monopoly
- Use of price controls. This is where the government fixes the prices of commodities produced by monopolists. This helps to reduce the monopoly power. The government fixes the price below the one charged by the monopolists. This forces the monopolists to increase output if he is to earn more profits.
- Taxation. The government can impose high taxes on the monopolist so as to reduce on the abnormal profits. Taxation can be successful if the commodity produced by the monopolist has elastic demand.
- Nationalization. This is where the government takes over the private firm owned by the monopolist with the purpose of controlling the supply of a given commodity. In this case, the government can now provide the commodity at lower prices to the consumers.
- Anti-monopoly legislations. These are laws or regulations which are imposed by the government to control monopoly activities. Such laws prohibit monopoly activities as far as the supply of a given commodity is concerned.
- Subsidization. This is a policy where the government provides incentives to other firms through subsidized factor inputs with the purpose of encouraging them to compete favorably with the original monopoly firm, this helps to reduce monopoly power in the country.
- Privatization. The Privatization policy involves the transfer of ownership of state owned enterprises to private individuals. This helps to reduce monopoly power possessed by the government parastatal.
- Liberalization. This policy helps to remove restrictions in trade activities. It allows other firms to freely join and participate in the economic activities which have been monopolized by a few firms hence reducing on the monopoly power.
- Anti-Protectionism policy. The government can remove trade barriers with the purpose of exposing local infant industries to external competitors. This helps to reduce the monopoly of the local firms.
CATEGORIES Economics
TAGS Dr. Bbosa Science
