Answer to Question #208523 in Macroeconomics for Sinentlahla

Question

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

2. How has eskom as a monopoly has impacted on the South african economy, since 2009 (50)

Answer 1

1). The government may be involved in creating a monopoly through granting a single firm the exclusive right of producing a certain good. The government similarly grants exclusive ownership of inventions through patent law to assist in eliminating market failures that can occur in the market for respective commodities.

Government has a policy of investigating mergers that may generate monopoly power. When the new merger creates an organization with a market share greater than 25%, it is automatically sent to the Competition and Markets Authority (CMA). The CMA can choose to block or permit the merger considering if it believes it is within the public interest.

2). Eskom is the main driving force in the economy, not only through its role as a major energy supplier, but similarly through the economic stimulus provided by its operations and large capital investments. Eskom provides more than 90% of South Africa's electricity, which is a key input for most major industries. Eskom assist in the back up of events within South Africa hence boosting the country's economy.