Thursday, September 6, 2007

In economics, government monopoly (or public monopoly) is a form of coercive monopoly in which a government agency is the sole provider of a particular good or service and competition is prohibited by law. It is usually distinguished from a government-granted monopoly, where the government grants a monopoly to a private individual or company.
A government monopoly may be run by any level of government - national, regional, local; for levels below the national, it is a local monopoly. The term state monopoly usually means a government monopoly run by the national government, although it may also refer to monopolies run by regional entities called "states" (notably the US states).

State monopoly Examples
In many countries, the postal system is run by the government with competition forbidden by law in some or all services. Also, government monopolies on public utilities and railroads have historically been common, though recent decades have seen a strong privatization trend throughout the industrialized world.
In the United States the police system is a monopoly.
In Scandinavian countries some goods deemed harmful are distributed through a government monopoly to reduce the harmful effects. For example, in Finland and Sweden, government-owned companies have monopolies for selling alcoholic beverages. In Finland, government has also a monopoly to operate slot machines.
Governments often create or allow monopolies to exist and grant them patents in order to help grow a nation. This will limit entry and allow the patent-holding firm to earn a monopoly profit from an invention-a reward for developing the new product. Without it incentives would fall.
Health care systems where the government controls the industry, such as the British National Health Service, are sometimes referred to as government monopolies.

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