exaction price made possible by the scarcity it is able to cause.
The key to monopoly is scarcity. Some scarcities are natural, such as mineral deposits and land sites; there is no way for humans to duplicate them. The ownership or control of these limited opportunities to produce enables the monopolist to exact a rent price for the use of them. The rent price is fixed by their relative scarcity—or by the yield of any given site over that of any other site available to use. In point of fact, the rent price is fixed by competition among users or producers for exclusive possession of these locations.
Other scarcities are made by law, and the mechanism by which these scarcities are effected is always a coercive restriction on competition. Although the restrictive measures are sometimes concocted by individuals or groups in search of a monopoly price, these are of little effect unless and until they are implemented with the strong arm of the law, as when it imposes trade regulations, tries to fix prices, subsidizes inefficient producers at the expense of efficient ones, enables labor organizations to put limits on enterprise, or grants special privileges to favored individuals. This brings us to a consideration of the part played by the political organization of Society in its economy, which we must leave to a later chapter. For the present, we leave the matter with this observation: there cannot be an effective blocking of
- The competitor, like the monopolist, seeks the highest price which will yield him the highest net profit. But, because he is unable to control supply, and thus induce a scarcity, his highest price is what competition will allow him to charge, which is always lower than what he would like. In a competitive business, the net profit breaks down to interest on investment, replacement of capital, and the wages of superintendence. Only in a monopoly business is there a "little extra."