Unit 12 Markets and Monopolies

Text A

The term 'market', as used by economists, is an extension of the ancient idea of a market as a place where people gather to buy and sell goods. In former days part of a town was kept as the market or marketplace, and people would travel many kilometres on special market-days in order to buy and sell various commodities. Today, however, markets such as the world sugar market, the gold market and the cotton market do not need to have any fixed geographical location. Such a market is simply a set of conditions permitting buyers and sellers to work together.

In a free market, competition takes place among sellers of the same commodity, and among those who wish to buy that commodity. Such competition influences the prices prevailing in the market. Prices inevitably fluctuate, and such fluctuations are also affected by current supply and demand.

Whenever people who are willing to sell a commodity contact people who are willing to buy it, a market for that commodity is created. Buyers and sellers may meet in person, or they may communicate in some other way: by letter, by telephone or through their agents. In a perfect market, communications are easy, buyers and sellers are numerous and competition is completely free. In a perfect market there can be only one price for any given commodity: the lowest price which sellers will accept and the highest which consumers will pay. There are, however, no really perfect markets, and each commodity market is subject to special conditions. It can be said, however, that the price ruling in a market indicates the point where supply and demand meet.

Exercise 1. Answer these questions, basing your answers on the text.

1. What was a market originally?

2. What is a modern market?

3. Among whom does competition take place?

4. What does competition influence?

5. What three things cause prices to fluctuate?

6. When is a market created?

7. What three means are mentioned by which buyers and sellers can communicate if they do not meet in person?

8. What price operates in a perfect market?

9. What does the ruling price indicate?

Exercise 2. Say whether these statements are true or false, and if they are false say why.

1. The ancient idea of a geographically fixed market place has been extended to cover sets of conditions which permit buyers and sellers to work together.

2. The world cotton market is not located in any special place.

3. The competition between buyers of a commodity influences the prevailing prices.

4. Supply and demand inevitably affect prevailing prices.

5. A market for a commodity is created whenever buyers and sellers meet in person but not when they work through their agents.

6. Competition in a perfect market is conducted in a completely free way by numerous buyers and sellers enjoying easy communications.

7. The lowest price which buyers will offer is the only price in a perfect market.

8. Each commodity market is imperfect in some special way.

Exercise 3. Combine these pairs of sentences by using 'as' and 'by' making the second sentence passive. Two answers are required.

EXAMPLE: The term 'market' is an extension of the ancient idea of the market-place. Economists use the term in a special way.

i The term 'market', as the term is used by economists, is an extension of the ancient idea of the market-place.

ii The term 'market', as used by economists, is an extension of the ancient idea of the market-place.

1. The term ‘labour’ means any work done for a known reward. Economists use the term in a special way.

2. The term ‘money’ refers not only to a means of exchange but also to a means of measuring the value of men's labour. Economists understand the term in a special way.

3. The idea of a perfect market is a theoretical concept and not a practical reality. Economists present the idea in a special way.

4. The methods of controlling prices and wages will probably not succeed. The government described the methods in a special way.

5. The scheme for a new industrial complex will take fifteen years to complete. The planners discussed the scheme at the meeting in a special way.

Exercise 4. Arrange these sentences in their proper sequence in order to obtain a paragraph on durable goods.

A Finally, it is interesting to note that many buyers and sellers on important markets never see the commodities which they buy and sell. B Commodities like these can be bought and sold and stored without difficulty by people who live at great distances from each other and from the sources of supply. C Certain commodities have a wider market than others.

D In addition, commodities which are easy to transport, safe to handle and simple to grade are generally in universal demand. E Durable foods, for example, have a far wider market than perishable goods. F For this reason such goods are a good commercial proposition simply because the risk of investing in them is relatively low.

Exercise 5. This table shows how words are formed from the stem var-. List the words and then use them to complete the sentences.

var	y Verb
	i	able ed Adjective ous
		ety Noun ation

1. Conditions on that market are stable and do not ______ very much from year to year.

2. That businessman handles a very ____ selection of products, including bananas, toys and cars.

3. It is often difficult to classify the ______ types of economic system in the world, because they tend to possess elements of capitalism and communism in different degrees.

4. The managers of that company hope to increase the _______ of products which they offer for sale to the public.

5. There has been little _______ in price levels over the last five years.

6. Because prices on that market fluctuate considerably from week to week, we say that they are _______.

Text B

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. In some markets there may only be one seller or a very limited number of sellers. Such a situation is called a 'monopoly’, and may arise from a variety of different causes. It is possible to distinguish in practice four kinds of monopoly.

State planning and central control of the economy often mean that a state government has the monopoly of important goods and services. Some countries have state monopolies in basic commodities like steel and transport, while other countries have monopolies in such comparatively unimportant commodities as matches. Most national authorities monopolize the postal services within their borders.

A different kind of monopoly arises when a country, through geographical and geological circumstances, has control over major natural resources or important services, as for example, with Canadian nickel and the Egyptian ownership of the Suez Canal. Such monopolies can be called natural monopolies.

They are very different from legal monopolies, where the law of a country permits certain producers, authors and inventors a full monopoly over the sale of their own products.

These three types of monopoly are distinct from the sole trading opportunities which take place because certain companies have obtained complete control over particular commodities. This action is often called 'cornering the market' and is illegal in many countries. In the USA anti-trust laws operate to restrict such activities, while in Britain the Monopolies Commission examines all special arrangements and mergers which might lead to undesirable monopolies.

Exercise 1. Answer these questions, basing your answers on the text.

1. What is not always available in the real world?

2. What is a monopoly?

3. What are the first three kinds of monopoly?

4. What examples of important state monopolies are given?

5. What are Canadian nickel and the Suez Canal examples of?

6. What are certain inventors permitted by law to have?

7. What word in the last paragraph shows that the fourth type of monopoly is quite distinct from the other three?

8. What happens when certain companies obtain complete control over particular commodities?

9. What do the Americans call their anti-monopoly laws?

10. What does Britain use to restrict special arrangements?

Exercise 2. Say whether these statements are true or false and if they are false say why.

1. ‘Monopoly’ describes a market in which there is only one seller or a very limited number of sellers.

2. In theory there are four kinds of monopoly.

3. States always monopolize important basic commodities.

4. Egyptian nickel is a good example of a natural monopoly.

5. Cornering the market is quite legal in the USA.

6. The Monopolies Commission consider that it is undesirable to restrict business mergers.

Exercise 3. Change the second sentence in these pairs of sentences in the same two ways as in the examples. The meaning remains the same in each case.

EXAMPLE: In some markets there may only be one seller. A situation like this is called a monopoly.

i A situation of this kind is called a monopoly.

ii Such a situation is called a monopoly.

1. In some countries production is certainly planned. A situation like this is usually communistic.

2. In some countries production is a matter of private enterprise. A situation like this is called capitalism.

3. In some countries there are both private and public sectors. An economic system like this is known as a mixed economy.

4. In most markets it is not necessary for buyers and sellers to meet in particular location. Markets like this are quite different from the marketplaces of ancient towns.

5. For some people investment in new business enterprises is not too great a risk. People like these sometimes make considerable profits but on other occasions can lose much of their capital.

Exercise 4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets, colons etc., where applicable.

monopolies and similar arrangements may be referred in britain to the monopolies commission between 1948 and 1965 the commission presented some twenty six reports the government in 1965 passed a special act called the monopolies and mergers act which re organised and enlarged the monopolies commission it provides for the investigation of services and mergers especially newspaper mergers and improves and extends the government powers for taking action the action of the government is based on the monopolies commissions report

Exercise 5. Find single words in the text for which those words could be substituted.

1. many (§ 1) f. relatively (§ 2) k. commercial (§ 5)

2. restricted (§ 1) g. frontiers (§ 2) l. unlawful (§ 5)

3. condition (§ 1) h. type (§ 3) m. limit (§ 5)

4. separate out (§ 1) i. allows ( 4) n. studies (§ 5)

e. essential (§ 2) j. categories (§ 5) o. unions (§ 5)

Supplement

Here is a single histogram showing national expenditure on goods in Noland over a three-year period. The histograms of the three separate years have been combined into one. Study it and then answer the questions.

a. Which two classes of commodity are the most static or stable over the three-year period?

b. Which class of commodity shows the most sustained upward trend?

c. By how much is this class growing each year?

d. What is the total expenditure on clothing over the three-year period?

e. By how much is the total national expenditure greater in 1990 than in 1992?

f. What can be said about the amounts of money spent in 1990 on housing and in 1992 on durables?

Essential Vocabulary

1. a set of набір, ряд, комплект

2. be subject to conditions бути обмеженим умовами

3. grade класифікувати

4. universal demand загальний попит

5. handle Am.E. займатися купівлею та продажем, торгувати (чимсь)

6. unrestricted = unlimited

7. state monopoly державна монополія

8. natural monopoly природня монополія

9. legal monopoly монополія, яка має юридичну основу

10. corner the market монополізувати ринок, скупуючи товар; заволодіти ринком; скупити ринок (придбати певну кількість якогось товару, достатню для того, щоб контролювати його ринкову ціну)

11. merger злиття; об'єднання (підприємств тощо)