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Word Count: 620
Monopolies Monopolies are under constant critics from the public and other producers of being polutive straining to competition and they are accused of worsening resource allocation Whether this is true or not depends on the specific company but certain characteristics are possible to define It is these I will describe in the following and hence conclude if monopolies worsen or improve resource allocation It is important to distinguish between competition and monopoly before describing advantages and disadvantages of both Many monopolies are government owned This means that the incentive to strive for more profit better conditions etc is gone This is due to the fact that if there is a loss the government will cover it and government owned companies seldom strive to achieve maximum profits A lot of the characteristics are also seen in privately owned monopolizing firms When they become so big that competition is practically gone the incentive to make even more profits and being innovative diminishes In a competitive industry this is not the case The fear of loosing your job not being able to compete your products becoming obsolete etc are important factors which stimulate productivity It is therefor obvious that the competitive industry will try harder to allocate their resources in the most efficient way To land the external costs in a competitive industry will often be pollution seeing that the firm will strive hard to diminish their costs resulting in the firm ignoring unnecessary costs The monopoly owned by the government would never be able to ignore such a serious matter and they would have to pay the costs A monopoly would also have to be careful not to damage its image seeing that is in many cases already is unpopular Capital
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