- How did your understanding of monopolies change after reading this chapter? What do you see differently now?
- Give an example of a regulated monopoly (a monopoly that exists due to government fiat). Why did we choose to give this particular firm monopoly status? Do you think it was a good decision? Why or why not? Would you expect prices to rise or fall if we allowed other firms to enter the market? Why? (Pricing is not always the reason we create a monopoly by government fiat.)
(Think about how the government sets prices – what do they base pricing on and can the data be manipulated by firms?)
My understanding of monopolies changed a lot after reading this chapter. Prior to going through all of the aspects of how monopolies work, I only heard about them from news sources. The US government has had many cases in the past 20 years about breaking up monopolies with major technology companies. It was very eye opening to read about the different types of monopolies, and how some are good. I am glad that the government is aware of monopolies and tries to protect the consumers from their potentially malicious behavior.
A regulated monopoly example is our local water district. They have all the utility pipe infrastructure, water treatment plant, sewer waste treatment plant, etc. It is not usually feasible to have a competitive market for water. Water also being a necessity for people to live means the government has a collective incentive to help provide good clean water to its citizens. I would think if other firms entered the market for water that the prices would fall after some time. The startup entry costs to enter are very high with the infrastructure required. Monopolies can be an inefficient use of resources if the monopolies are not incentivized to produce.
Dude.World 