> Basically, offering poor/expensive service in capitalist system will naturally invite competition until the optimal price/value point has been reached.

If all the farmers form a cartel, where does this mythical competitor come from? Farmland is a limited resource. And food doesn't just magically appear the day you start a new farm.

You discount the abilities of monopolists to prevent new market entrants. They can lower prices only when there is a new player, until that player goes bankrupt, and then raise them again, discouraging others from trying again. They can lock up suppliers in exclusive contracts, preventing competition from sourcing parts. They can run massive disinformation campaigns. They can launch a series of baseless lawsuits. Etc... It's straightforward to have an abusive hold on a market without any government involvement at all, all you need is some deviousness.

I think that your argument depends on perfect markets - perfect flow of information and 100% market efficiency (no transaction costs) and also perfect computability as in the capability for all actors to compute the optimal clearing of the optimal transaction system for the transaction at hand.

I am pretty sure that teaching and medicine are the kind of good that would break these rules - political implementation, people and markets or no.