I’m studying for my Economics class and need an explanation.
Microsoft and Google have both faced charges under anti-trust laws related to alleged “anti-competitive” behavior due to the fact that some parts of their business resemble monopolies. These businesses are both extremely profitable because they create tremendous value for their customers. Starting these businesses required unique knowledge, and immense creativity, tenacity, and tolerance for risk. It is not easy to create a monopoly.
Should monopolies be regulated by the government, or do the creators of these businesses deserve the large profits they earn because of difficulty of starting the businesses? Why or why not?
Reply post: In my opinion, I think the government should regulated monopolies because of protecting of interest of consumers that means prevent excess prices and does not lead to allocative inefficiency and a decline in consumer. Also, it keeps the quality of service by ensure the firm meets minimum standard of their service. Without monopolies, companies like Google or Microsoft selling a power may also be in a position to exploit monopsony buying power. For instance, some big companies the take advantage of their brands’ names and market position to squeeze profit margins of their really material suppliers. So, promote completion in some industries is possible to encourage competition. Therefore, we cannot encourage competition, and it is essential to regulate the firm to prevent the abuse of monopoly power. In other side, I stand with the natural monopoly. This is because most of the true monopolies today in the U.S. are regulated, natural monopolies. A natural monopoly poses a difficult challenge for competition policy, because the structure of costs and demand seems to make competition unlikely or costly. A natural monopoly arises when average costs are declining over the range of production that satisfies market demand. This typically happens when fixed costs are large relative to variable costs. As a result, one firm is able to supply the total quantity demanded in the market at lower cost than two or more firms, so splitting up the natural monopoly would raise the average cost of production and force customers to pay more.