Answer to Question #208520 in Macroeconomics for Sinentlahla

Question

1) How government are involved in creating monopolies (10)

2) How eskom as a monopoly has impacted on the South African economy, since 2008(50)

Answer 1

By providing exclusive rights to a single firm to produce a certain commodity, the government can create a monopoly. Patent laws also provide the government sole ownership of inventions, which helps to prevent market failure in some markets. The fact that these monopolies were established with the help of the government by large corporations is intriguing. As a result, rather than destroying monopolies, the government appears to be building and nurturing them.

Eskom is an important economic engine not just because it is the country's primary electricity source, but also because of the economic boost it generates via its operations and significant capital investment. Eskom produces more than 90% of South Africa's electricity, which is necessary for most major industries. Eskom's most important duty is to ensure that power is available at all times in order to support economic growth and improve the quality of life for South Africans.