Financial Management - Essay Example

Monopolies Monopolies are specific entities that receive minimal competition in the provision of particular goods and services. Existence of monopolies is as a result of government’s intervention following a failure in the free market. The free market allows supply and demand forces to dictate the type and quantity of goods and services to be produced as well as the price on each product. Therefore, in case the free market fails to achieve its goals, the government intervenes to provide public facilities, to avoid industry crowding, and finally protect the external environment of a business (Finkler 3).

Public facilities are those centers that provide service to the entire public at large, for example, a pack or a sport stadium. People will enjoy using the facilities, but none of them would be willing to personally pay for the entire cost incurred in establishing the facility. In most cases, such facilities are the only of their kind in the entire country which makes them monopolies in nature. The second government intervention to protect the external environment, would be in response to business practices that negatively impact the public; such as air pollution.

For example, the negative impact that would result from air pollution does not by any means affect the business’s cost in production but it does affect the society. Therefore, the government may increase the tax on the product to raise its production cost as a way of regulating such practices (Finkler 5). Increase in production cost would hinder the entry of other entities in production of the same product making one entity the only producer. Lastly, the government may intervene to avoid many businesses entities crowding in a particular field.

For example, the government would not prefer many electric industries since it would be a waste of resource to putting up so many posts and wire in the streets. Doing this makes the electric industry a monopoly. In conclusion, monopolies are therefore legal entities because the government contributes in their formation. In addition, government bodies, non- profit- organizations and health care organizations that offer services similar to private organizations but in a subsidies cost are other forms of monopolies.

Work CitedFinkler, Steven. Financial Management for Public, Health, and Not-for-Profit Organizations. New Jersey: Prentice Hall, 2005. Print.