Natural Monopolies

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?

“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.

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.

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

Up until the 1880s, the United States economy followed the policy of laissez-faire (the idea that the government should have no involvement in the economy), and this led to competition which led to good prices of goods for the average consumer. However with the growth of many large companies that controlled the market, prices of goods raised due to the lack of competition. With consumers becoming frustrated and prices constantly rising, the government was forced to regulate the control of monopolies in the market.

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

Monopolies are quite dangerous economically, and are usually broken up by the federal government, with only two exceptions- electricity, and gas. These are modern examples. A monopoly is the economic term for when a company that makes a product has no competition, and can raise the prices as high as they want. For example, the most obvious and powerful monopoly of the industrial revolution was the railroad monopoly. They made money quite quickly as a shipping company, and destroyed any and all competition as the only transcontinental railroad at the time. It’s leader, Cornelius Vanderbilt came to be considered one of the most powerful people of all time, due to his control over who he shipped for.

In this essay I will discuss a few terms and how their relationships apply between regulation and market structures, as well as how regulation policies affect the market.

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.

There have been positive attributes from the regulations. One of the positive effects on businesses is that enhanced environmental security has allowed for more investors to start trade in the regions with effective regulatory measures. This is because increased regulatory measures have resulted in the investors gaining not only positive returns, but also consumer trust due to their compliance (Lieberman, 2010). Therefore, there has been significant growth in investment; however, the negative influences have managed to cover these positive influences. The government has also managed to generate substantial amounts of money from the charges and used them in establishing a friendly environment for other potential investors.

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.

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.

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

What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.

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.