GE-10

1. Vocabulary.

Complete each sentence with a word or phrase from the box.

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aggressive cables illegal innovation legal naturally

network occurs printing publishing takeover

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1. A ……………………………. is a set of connections.

2. When one company gains control of another company it is called a ………………………………..

3. Raw materials are things like wood or oil that exist ………………………………..

4. Electricity travels along …………………………………. to reach our houses.

5. ……………………………….. people get whatever they want by violence and force.

6. ………………………………… companies are responsible for the text and pictures in books, etc.

7. …………………………………. companies make books.

8. ………………………………….. is inventing and thinking of new solutions to problems.

9. If something is ………………………………., it is allowed by law.

10. If something is not permitted by law, we call it ……………………………….

11. If a problem ………………………………, you will have to deal with it as soon as possible.

2. Reading.

Monopolies

In a monopoly, one company has a much larger market share than any other company. In fact, its share is so big, that other companies cannot really compete. When there is a monopoly, the normal laws of demand and supply don`t always work. Monopolies come in different forms, but a pure monopoly means that there is only one company in the market providing a particular product or service. This situation is the exact opposite of perfect competition. How do pure monopolies happen?

Some monopolies occur naturally. This happens when the company manages to create an economy of scale. An economy of scale is when variable costs of production increase more slowly than its supply increases. Every company would like to be in this situation, but unfortunately, it`s not easy to achieve. Economies of scale are possible for companies which need a lot of money to set up, but less money to run.

A telephone company is a good example. Telephone companies have to spend millions of pounds laying cables. However, once they have made the network, running the system does not cost so much. Any other company that wants to compete, will have to make their own network. Not surprisingly, very few bother!

However, the world of business is a jungle, and there are more aggressive ways to create a monopoly. One of them is by making takeovers, which means that a more powerful company buys a smaller one in the same industry. Takeovers happen vertically or horizontally. In a vertical takeover, a company buys companies that supply it with materials or services. For example, a publishing company might buy a printing business. In a horizontal takeover, company buys its competitors, who later become a part of the first company.

The final way how a monopoly occurs is when the government makes it happen. This is called a legal monopoly, but this is not because other monopolies are illegal. It is called legal because it is created by law. The government may decide that a competitive market is not good for a certain industry. In this case, it can make one company the only legal supplier. Sometimes, the government provides service itself, then it is called a state monopoly. The postal service in many countries is an example of state monopoly.

Generally, monopolies are not good for consumers. This is because in a monopoly the laws of demand and supply do not work as they should. A monopolistic company becomes a price maker. They have much more power to set the price for their product or service. Also, they usually don`t spend money on innovation because they don`t need to. The bottom line, as they say, is that monopolies mean less choice for consumers.

3. Comprehension

Consult the text and match terms on the left to their definitions on the right.

pure monopoly	A company with the power to set prices in the market
natural monopoly	when a company buys a competitor
legal monopoly	when only one company supplies to the market
horizontal takeover	when a company buys a supplier
vertical takeover	when a monopoly occurs due to economies of scale
price maker	when a monopoly occurs due to government control

4. Listening

Listen to someone talking about the threats that monopolies face. Which of the following things does he mention?

1. rising variable costs

2. a fall in demand

3. a change in fixed costs

4. innovation by another company

5. takeovers by a foreign company