“Monopoly has developed in both product and resource markets because of the shortcomings and inefficiencies of competitive markets.” Do you agree? Explain
What will be an ideal response?
This is true in the case of “natural monopolies” where economies of scale lead to the most efficient size firm being one that monopolizes the market. More and smaller firms would be inefficient in such cases.
Monopolies have also developed as a result of patent law protection, but in this case the shortcomings or inefficiencies of the competitive market cannot be blamed, but rather the monopoly is a result of government policy.
Finally, monopoly power has developed in industries where market forces no longer provided adequate control to ensure socially tolerable behavior. In these cases the statement would be true.
You might also like to view...
In general, the supply curve for a natural resource
A) slopes upward. B) slopes downward to reflect decreasing available quantities over time. C) is horizontal. D) is vertical.
When a firm produces one unit, the variable cost is $3. When the firm produces two units, the variable cost is $6. What is the marginal cost associated with two units of production?
A) $2 B) $0.5 C) $6 D) $3
Which of the following is not a not-for-profit institution?
a. Columbia Broadcasting System (CBS) b. American Red Cross c. Salvation Army d. a public library e. a typical college or university
The most effective government policy for reducing poverty is to
a. reduce discrimination in the job market based on gender and race b. abandon all government programs and rely on private charity c. reduce programs that promote education and training of the poor d. dramatically increase Medicare payments to the elderly e. promote economic growth and job creation