Natural Monopolies

B) The intended purpose of Industrial or Economic regulation as applied to Oligopolies and Monopolistic market structures is used to reduce the market power of both! A government commission regulates the prices charged by “natural monopolists.” Industrial Regulation is necessary to prevent natural monopolies from charging monopoly rates which may harm consumers/ society. Industrial Regulation tries to establish pricing that will cover production costs and provide a fair amount of return to businesses. Price=Average Total Cost, where normal profit is accomplished. (governs pricing, output, & profits in specific industries).

Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open to competition for market share to begin. In terms of regulation of monopoly, the government attempts to prevent operations that are against the public interest, call anti-competitive practices. Likewise, oligopoly is a market condition where there are minimal distributors that have a major influence on prices and other market factors. This causes market failure, especially if evidence of collusive behavior by dominant businesses is found.

Finally is the allowance of these monopolies to rise in the first place. Since there were no regulatory agencies back in the second industrial revolution, big businessmen with the idea of trimming fat in their companies could conquer any competitor by using hardball tactics of purposely

“For example, the federal government regulates the quality of food and water, the safety of workplaces and airspaces, and the integrity of the banking and finance system.” (Bianco, Canon 2011, p 582) Regulations find out if the product is a market failure. There are two types of regulations, which are economic and social. “Economic regulations sets prices or conditions on entry of firms into an industry, where as social regulation address issues of quality and safety.” (Bianco, Canon 2011, p 582) Economic regulations are concerned with the price regulation of monopolies.

The restraint against monopolies help

Prior to the American Era of Industrialization, the American Civil War had just taken place that gave the Northern Economy war profits that were eventually invested into industrialization. However, the Age of Industry, in the United States, was extremely harmful to the nation, due to the fact that the idea of Social Darwinism arose, there was corruption within the government, and monopolies began arising which had a negative effect on the the economy and the working class. Monopolies, in the industrial period, had a negative impact across the nation due to the fact that monopolies made life difficult for the arising middle class, economically speaking. Document 1 illustrates perfectly how monopolies made life difficult for the working class

There are two types of regulations: economic and social. An Economic regulation is the prescription of price and output for a specific industry, as Social regulation is the prescription of health, safety, performance, and environmental standards that apply across several industries. Most economic regulations happened after the Great Depression, under the leadership of President Franklin D. Roosevelt, in which a natural monopoly, like utilities, railroads, and communication would match that of a competitive market, thus setting a market-price cap. Understanding that in some aspects the government cannot stop a monopoly without causing market harm in some cases, so they attempt to rectify it. The government gives companies fair rates of returns, which is a price that allows a monopoly firm to earn a normal profit, similar to one gained when a companies marginal cost matches their marginal revenue. This is especially important, because when the government calls for the deregulation of a company, it leaves behind stranded assets, properties that lose values after the intervention. Other ways government can aid in the deregulation of a business is through privatization and contracting out; the government can either enlist a private firm to do a service on their behalf, or even transferring the public enterprise to private

The regulatory measures target the emissions from industries as well as the products resulting from certain industries. The agency establishes certain regulations that seek to standardize the emissions in terms of quantity and if companies are found

Another type of regulation we come across is the cost-benefit analysis. This is defined in the text as a systematic method of calculating the costs and benefits or a project or activity

A monopoly is advantageous to the society and is encourages by the government if there are high fixed costs and very strong economies of scale. At the same time, it could also lead to unequal distribution of wealth; containment of consumer choice; lobbying and unethical spending.

Before answering why monopolies are discouraged by both state laws and federal laws. Important is to know what the word monopolies means. Where one producer, or a group of producers, control the supply of goods or service on the market. Additionally, the market is highly restricted and it is very hard for other producers to enter. Firms that are defined as monopolist firms, keep their prices high and restrict the output, so they can maximize their profits. They often have no responsiveness when it comes to the needs of their customers. By preventing total control over the market, some governments control the monopolies by having three important rules. First they impose a price control, second by taking over their ownership, and thirdly by

Natural monopolies are cases in which production costs, infrastructure, and demand structure lead to a single monopolizing firm producing the good at lower cost than any other arrangement. Under such situations, firms will tend to over-charge and under-supply, causing a reduction in social surplus and an inefficient distribution of goods. A lack of competition is a fundamental violation of the idealized market assumptions. Little or no competition leads to inefficiencies of production and operation (Weimer and Vining p. 102). Furthermore, natural monopolies give an unfair and non-competitive advantage to firms that have entered the industry first. In cases of natural monopolies, government must typically regulate private industry in an attempt to maximize surplus, or, alternatively, government may provide the good or service publicly.

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?

Fees and regulations are similar to taxes. The government charge all firms the same fee and to set the same standard for all firms. This will achieve the same level of emission reduction at a lower cost for all firms and firms will have an incentive to reduce their emissions.

1 - There is a separation of service and payment. Because monopolies are funded through taxation, they cannot go bankrupt - they can always get more funding from the public coffers. Therefore, monopolies have little incentive to be efficient.