Discuss The Extent To Which a Monopoly Provider...

Discuss the extent to which a monopoly provider of transport leave alone continuously increase economic power (20)

Economic efficiency is where both allocative and reproductive efficiency occur, this is where price is equal to marginal cost and the least possible amount of scarce resources ar used to produce the maximum output. A monopoly can advert to a single firm in a food marketplace or throwing 25% and 40% of the market shargon.

The traditional monopoly supposition states that there will be productive and allocative inefficiency in the market since, the firm will hold back supply to view a higher price. It will non produce where total revenue meets marginal costs. In terms of resource parcelling this may mean that demand is not fully met by supply. Output is below what consumers want and not enough resources are allocated to the production of this good and they are not produced at the forecast were average costs are lowest and so allocative and productive inefficiency occurs.



This is true for the pure transport monopolist BAA who own the three largest airports in the UK and have been accused in 2008 of world in economic, this is stated by the competition commission, This has resulted in investment that is not tailored to the requirements of airport users and lower levels and quality of service for both airlines and passengers. This could be an example of X inefficiency since BAA dominate the market and may have less incentive to be efficient and keep costs down, this will rise over beat because of complacency, and so some monopoly providers of transport will not always increase economic efficiency, this is shown on the diagram below.

Above shows a monopoly diagram. The economic inefficiency is highlighted especially by the welfare outlet to the consumer this is because surrounded by q0 and q1 the extra benefit of the unit (shown by the price) exceeds the extra cost. and then welfare would increase if these were produced. This area however is welfare loss because q0q1 are not...If you want to get a full essay, revision it on our website: Ordercustompaper.com



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