Buy custom The Problem of Monopoly essay

The main reason why monopoly is considered as a problem is that it reduces the aggregate welfare. The scheme is the following: monopolist sets the price at the unreasonably high level. Less people can afford the goods and services due to the high price, so they consume less is. Considering the fact that consumption is low, the aggregate welfare is lower than it could have been in the case of competitive market.

Talk to an operator Order now

Yes, my assumption was different. From the customer's point of view, monopoly is considered a problem because the customer needs to bear the higher associated expenses. Thus, wealth is transferred from customers to producers without any economically proven reason for this.
The first method that is used to cope with the monopoly is an antitrust policy. This is the most expensive and slow-acting method. The second option is the public regulation, which is the most popular method. The last measure is the public ownership and operation.
The regulated monopoly can earn less profit than the unregulated one. In the case when the government sets a price at a level equal to the firm's marginal, the firm will experience losses as long as the price will be smaller than the firm's average total costs. In order for the monopoly to break-even, the average total costs must equal the price.
The most striking examples of unsuccessful monopolies were the American Telegraph and Telephone Company and the the United Auto Workers. The loss of power of the AT&T occurred due to the implementation of the anti-trust legislation. The UAW lost their monopolistic power due to the development of international trade and the activity of international competitors. As soon as the American company had no legal influence on international players, like Toyota, it lost its advantage. The acquisition of the Wild Oats by the Whole Foods' is another example of unsuccessful monopoly is .

Talk to an operator Live chat

If we use a narrow definition of the market, the merger of Whole Foods' and Wild Oats might be treated as an example of monopoly power. Still, the sector of organic and clean products and services is growing, and the company has many competitors in this respect, for instance Sam's Club, Kroger, Schnuck's and Dierberg's. However, there is no formal definition of such sector as 'premium natural and organic supermarkets". Thus, if we use the broad definition of the market, the Whole Foods and Wild Oats are competing in grocery retail sector. Thus, this is highly unlikely that the acquisition of Wild Oats will result in monopolization of such a huge market.
In my view, the decision of FTC was unreasonable. The company has many competitors in retail business. Besides, the 'organic and premium supermarkets' is a growing sector that attracts more and more competitors to enter. To my mind, there was no sign of monopoly power.

Related essays

  1. Foreign Investment in Russia
  2. The Role of Aviation in Economic
  3. Economics of South Korea
  4. The Dubai Mall