Discuss why there is inefficiency in a monopoly situation. What is the role of the government in such situation?
What will be an ideal response?
Answer: In monopolies, the state determines which companies were responsible for creating certain goods and services, such as gas, electricity, and telecommunications. The government funds these entities. Since these companies were then no longer worried about competition, they were not worried about competing for the best quality, leading to inefficiency. Monopolies, compared to free markets, are not concerned with the public, meaning the public gets no say in what is produced or how, yet they are forced to pay high prices for the product. Monopolies can charge whatever prices they wish because they have no competition forcing them to lower the price to get customers.
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