Impact of Removing a Firm's Monopoly Power on Consumers
Discuss whether or not removing a firm’s monopoly power will benefit consumers.
Market Structures and Competition
Frequently asked question
- Brief explanation of the topic
- Importance of discussing the pros and cons of breaking up a monopoly
II. Pros of breaking up a monopoly
- More choice for consumers
- Improved competition
- Prices will fall, increasing consumers' real disposable income
- Quality is likely to improve
- Firms will invest in research and development to maintain market share
III. Cons of breaking up a monopoly
- Monopoly firms can take advantage of economies of scale
- Removal of monopoly power may increase prices for consumers
- Consumers may rely on the reputation of a monopoly
- Too much choice can lead to confusion/inconvenience for consumers
- State-owned firms may take into account full social costs and benefits
- Summary of the pros and cons
- Final thoughts on whether breaking up a monopoly is beneficial or not.
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