Key Words and Phrases

immobility	відсутність мобільності факторів виробництва
indivisibility	неділимість, неможливість використовувати частинами
deliberate policy	зважена політика
temporary price-cutting	тимчасове зниження цін
collusion in submitting tenders	змова при поданні заяв на торгах

Exercises on the text:

Ex. 1. Read and translate the text.

Ex. 2. Answer the following questions:

1. How are monopolies formed?

2. What are the sources of monopoly power?

3. What does immobility of the factors of production mean? And how may it arise?

4. What is the difference between "spontaneous" monopoly and "deliberate" monopoly?

Ex. 3. Give Ukrainian equivalents for the following words and word combinations:

to exclude competitors; to control over the supply; means of raizing revenue; marketing boards; trade-unions; supernormal profits; cost-competitive; "natural monopolies"; a take-over bid; the sale of services; the fees to be charged; price-cutting; collusion in submitting tenders.

Ex. 4. Fill in the blanks with noun, verb or adjective forms. Use your dictionary if necessary.

	Noun	Verb	Adjective
	substitution	substitute	substitutive
	classification	—	—
	—	confine	—
	—	—	creative
	established	—	—
	—	acquire	—

Ex. 5. Give a short summary of the text. Unit 21 Modern Monopolies in Economic Development

Monopolies are not new phenomena: throughout business history corporations have achieved complete dominance over a wide array of industries.

In an economy which is substantially competitive, the main consequence of a few monopolistic situations are the price distortions which have been analysed by the neo-classical economists. The picture changes entirely if monopolistic situations are supposed to be diffuse (we may then speak of a monopolistic economy). The problem of price distortion is then superseded by the problem of the interactions between the strategy of the firm and the dynamics of the economy. We shall call "monopolistic" that behaviour of the firm which is capable of maintaining (in the long run) a profit margin higher than "normal" or of surviving for a long period in spite of having costs higher than is technically and commercial necessary (for instance because of higher wages or of special bonuses granted to persons and bodies inside and outside the firms).

In fact the monopolistic firms can enjoy a higher rate of growth is they can command a disproportionally large or productive share of total national investment. This can occur if:

(a) There is a precapitalistic sector allowing an almost infinitely elastic supply of labour to be utilized in enlarging the capitalistic sector. When such a situation occurs, the monopolistic firms case a break in the economic situation; we can then speak of breaking monopolies. Breaking monopolies have played an important role in the development of a few countries. Their effect is the net result of the positive effects of the price distortion and of some feedback effects which may be positive (as, for example, urbanization) or negative (as, for example, the curtailment of some free initiative).

(b) There are substantial possibilities of transforming the technology of the economy. To achieve such a transformation, large investments and a certain control of the market are required. We shall then speak of transforming monopolies.

Both the breaking and the transforming monopolies are of a transient type. Once the precapitalistic sectors are exhausted and the technological transformation completed, the maintenance of monopolistic power is jeopardized: a transformation of the system will occur.

When monopolies merely try to exploit barriers to entry to keep prices as high as possible, lacking either of the two above-mentioned conditions, we shall speak of stagnant monopolies. The higher profit may be devoted to unnecessary expenditures which may lead to:

1. An increase in demand. Then we my have a Keynessian tendency to full employment: price distortions become the main adverse consequence of monopoly.

2. An increase in rentiers' incomes which causes a more than proportionate increase in savings. Then monopolies may foster the rise of a stagnant economy in the Keynessian sense.

Two alternatives to classical exploitation of monopoly power, and to breaking and transforming monopolies, which are capable of avoiding the turning of monopolistic firms into stagnant monopolies, are provided by:

(c) international investment;

(d) demand creation by commercial activity, i.e. by policies of producing new commodities, or of differentiating the old ones and promoting their sale (mainly through advertising).

The interaction between the policy of the breaking monopolies and the economic process may explain the emergence of transforming monopolies or the tendencies towards stagnation which can develop in the economy. Different types of monopolies may operate at the same stage of development.