Monopoly Case Study

When the stock market crashed in October 1929, the nation plummeted into a major depression. An economic catastrophe of major proportions had been building for years. The worldwide demand for

1. Name two types of market failure. Explain why each may cause market outcomes to be inefficient.

In the late 1800s the farmers believed that the railroad companies were constricting their profits away, and the government was in favor which is what gave them the reason for discontent. The farmers had plenty of reasons to be angry/upset about that situation because the government saw a need for reform which alludes the fact that their were problems: Monopoly on railroads caused a raise in cost, deflated value of crops, and farmers weren’t treated in a friendly way by big business.

1. On Market Failure – We said that the rationale for public policy is either market failure and/or government failure. Address the following with this rationale in mind:

Choose one of the three types of market failure and give a real world example of it. Do you believe the government has the ability to solve this problem?

3. Pollution is considered by most a negative externality. Some economists would like to see the costs of these burdens incorporated into the price of goods that we buy. For instance, since coal fire power plants increase emissions that could potentially lead to climate change, these economists believe that the price we pay for electricity is not adequately high enough. Draw a completely labeled graph and illustrate on the graph how much higher electricity prices would be if the full costs of electricity production were taken into account. You do not need to provide actual numbers; rather, show on the

A solution to this inefficiency is direct regulation whereby the government tells the company how much it is allowed to pollute. This is known as a pollution permit – the Government give out the legal right to admit carbon to the atmosphere. Another solution is known as the command and control strategy – whereby detailed regulation of technology leaves polluters little choice in how to achieve the environmental goals. One other policy which is seen to be the most efficient, is imposing emission fees known by economists as a Pigovian tax. Under a system of Pigovian taxes, the government charges for the damage done by polluting. By doing so it converts the external cost into an internal cost (internalizes the externality). According to the article “Equilibrium Pollution and Economic Development in China” there is one such levy system in place whereby it formally requires that a fee be paid by any enterprise whose effluent charge exceeds the legal standard. This has been proven in the article to be an effective way of regulating pollution. This implementation of the tax can be shown in the diagram below.

Back when the America was divided in thirteen states, the commerce was small and still had many points to improve. As the time passed, these small business started to make commerce between different states, and, consequently, required the government to create laws regulating the commerce, such as the Interstate Commerce Act. With the help of the government, the economy started growing, and so, many monopolies started to appear and so to control business. Years later, these monopolies were much bigger and consequently, the prosperity of country was threatened since there were any competition, nor any incentive to provide best products opportunities. Therefore, the U.S. government was now required to create new laws regulating and intervening in the economy, even though going against the capitalist ideal.

For my research paper I decided to write about monopolies. I chose to write about monopolies because I wanted to learn more about them. No this type of monopoly is not a board game in which consumers engage in buying houses or property with fake money. Instead this type of monopoly is a firm that is the only seller of a good or service that does not have a close substitute. An example of a monopoly is natural gas company or Time Warner Cable or Microsoft and its Windows operating system. Although few people like monopolies and even though few companies are monopolies, the model of a monopoly can be useful. You see a monopoly is useful in analyzing situations in which firms agree to act together as if they were a monopoly. Monopolies are not illegal in the United States. What is illegal is actions taken by monopolies to limit competition. But there are times when one supplier in a market is better than a competitive market? Should the government work to protect that one supplier in a market?

Discharging taxes is the most effective way to limit the emission although it is difficult to monitor the volume of emission (Jayanthakumaran 2012, p.369). It is demonstrated (Rabe & Borick 2012) that carbon taxation might belong on a long list of worthy policy ideas that cannot be expected to survive translation on to real policy through political examine. Secondly, from the analysis of case study, carbon taxes system is the most efficient way to undertake the emission reduction. Because, under the cap-and-trade system, it is very difficult for regulators to check whether firms are obeying the systems effectively and regulators need to monitor large number of factories, this would lead to free permits.

Facts: The Louisiana State legislature granted the Crescent City Live-Stock Landing and Slaughter-House Company, the exclusive rights to engage in the livestock landing and slaughterhouse business in the City of New Orleans. A group of butchers sued under the 13th and 14th Amendments.

I feel that the United States government should have a larger role in our economy. I feel this because if there is a monopoly, other buisiness will not be able to stay open for very long. If there was a monopoly, they would be able to charge whatever they want for low quality goods. For example, Wal-Mart is kind of a monopoly. A lot of Mom and Pop who sell some of the same stuff as Wal-Mart are having to close down because more people are going to go to Wal-Mart.

In Australia, there is an emerging consensus that the government should take further actions to help mitigate and combat climate change. The current most accepted policy by government is the introduction of a carbon tax followed by an ETS in 2015. However we are focusing on the carbon tax in this essay and not the ETS. Here is a brief explanation of the dynamics of a carbon tax. A carbon tax is a tax on energy sources, which emit carbon dioxide (Co2). Therefore, carbon taxes address the problem of negative externality. Externalities are the subsequent effects when individual production or consumption of a particular good or service imposes costs or benefits on others. Therefore negative externalities are effects, which pose harm to others without their direct interaction (Basic Economics 2011). However, usual market practices and transactions do not reflect these cost and benefits in the prices involved in the transaction, or take into account in their transaction decision. Therefore this is a form of market failure. By imposing a cost on these negative externalities, the hidden cost can be addressed. Ultimately the purpose of a carbon tax is to reduce emissions of carbon dioxide and therefore reduce

Carbon pricing can have both positive and negative effects, and as a result, it is often disputed by those who are concerned with the potential hard a carbon pricing policy can cause on industry competitiveness, and by those who are concerned with the health or the environment. Opponents of carbon pricing argue that a policy that imposes taxes or other limits on production can harm the competitiveness of local industries relative to foreign. In addition, taxes and/or production limits would mean that prices will increase, hurting both job creation and consumers who rely on cheap products to make

As seen from both Figure 2 and Figure 3, the application of negative externality of consumption is appropriate, as it clearly indicates the before and after results of the implementation of the tax. As clearly shown, overconsumption leads to social inefficiency, but by applying a tax, a decrease in the consumption of plastic bags can allow for a shift of the market. The increase in social efficiency also allows for social cost and benefit to be equal. By applying taxes on the plastic bag negative externality it allows for a reduction in the supply of plastic bags. Due to this tax, the supply curve S1 will shift upwards to S2. This will inherently also reduce the gap between Qefficient and