LESSON 6. Monopolies and Competition

Grammar Presentation: Сложное дополнение.

Grammar Revision: Сравнительные конструкции. Страдательный залог.

MONOPOLIES AND COMPETITION

Economists consider every business to have competition. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most faVorable terms." It may stimulate innovation, encourage efficiency, or drive down prices. According to microeconomic theory, no system of resource allocation is more efficient than pure competition. Competition, according to the theory, causes commercial firms to develop new products, services, and technologies. This gives consumers greater selection and better products. The greater selection typically causes lower prices for the products compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).

Scientists believe competition to exist at different sizes; some competitions may be between two members of a species, while other competitions can inVolve entire species. In an example in economics, a competition between two small stores would be considered small compared to competition between several mega-giants. As a result, the consequences of the competition would also vary- the larger the competition, the larger the effect.

In addition, the level of competition can also vary. At some levels, competition can be informal and be more for pride or fun. However, other competitions can be extreme and bitter; for example, some human wars have erupted because of the intense competition between two nations or nationalities.

Honestly evaluating your competition will help you better understand your own product or service and enable you to know how best to distinguish your company in the consumer’s eyes and it points to opportunities in the market.

Although in a perfect market competition is unrestricted and sellers are numerous, free competition and large numbers of sellers are not always available in the real world. Our strict definition of a perfectly competitive market is a market in which every firm is too small to affect the market price.

If a firm can appreciably affect the market price of its output, then the firm is classified as an “imperfect competitor”. Imperfect competition prevails in an industry whenever individual sellers have some measure of control over the price of output in that industry. Imperfect competition does not imply that a firm has absolute control over the price of its product but at least some discretion in its price decision.

How imperfect can imperfect competition get? People know the extreme case to be monopoly. A monopoly (from the Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. It may arise from a variety of different causes. Primary characteristics of a monopoly are:

· Single Seller: For a pure monopoly to take place, only one company can be selling the good or service. A company can have a monopoly on certain goods and services but not on others.

· Significant Barrier of Entry: If a company has a monopoly on a good or service, it becomes prohibitively difficult for other firms to enter the industry and provide the same good or service.

· No close substitutes: Monopoly is not merely the state of having control over a product; it also means that there are no close substitutes available that fill the same function as the monopolized good.

· Price maker: Because a single firm controls the total supply in a pure monopoly, it is able to exert a significant degree of control over the price by changing the quantity supplied.

It is possible to distinguish in practice four kinds of monopoly. State planning and central control of the economy often mean that government has the monopoly of important goods and services, e.g. most national authorities monopolize the postal services within their borders. A different kind of monopoly arises when a country, through geographical or geological circumstances, has control over major natural resources or important service. It is called natural monopolies. Legal monopolies occur when the law of a country permits certain producers, authors and investors a full monopoly over the sale of their own products. Besides, there are exclusive monopolies. But they are rare today.

Vocabulary on the text

appreciably, adv, – заметно, ощутимо

arise, v, – возникать, появляться, проистекать

assets, n – pl. – активы

border, n – граница

circumstance, n – обстоятельство, случай; pl – обстоятельства, условия

compete, v, – конкурировать, соревноваться

competition, n – конкуренция, соревнование

competitive, adj – конкурентоспособный

competitor, n – конкурент, соперник

discretion, n – благоразумие, осторожность, свобода действий

distinguish, v, – различать

enable, v, – давать возможность или право (ч-л сделать); облегчать

endure, v, – выдерживать, выносить

estimate, v, – оценивать

evaluate, v, – оценивать; определять количество, качество ч-л

franchise, n – привилегия

honestly, adv, – честно; искренне, правдиво

imply, v, – подразумевать, предполагать, означать

internal, adj – внутренний

legal, adj – юридический, правовой

occur, v, – случаться, происходить

output, n – продукция, продукт, выпуск

permit, v, – позволять, разрешать

point, v, – показывать, указывать

prevail, v, – торжествовать (over), преобладать, господствовать

rare, adj – редкий, необычный

reckon, v, – считать, подсчитывать, подводить итог

restrict, v, – ограничивать

secure, v, – обеспечивать безопасность, охранять, гарантировать

significant, adj – значительный, существенный

strict, adj – точный, определенный, строгий

substitute, n – заменитель, замена, заместитель

tough, adj – жесткий, плотный, крепкий, стойкий

Phonetic and lexical exercises