ECON 1 Lecture Notes - Lecture 16: Clayton Antitrust Act, Price Ceiling, Natural Monopoly
Document Summary
We try to manage monopolies to reduce the harms. Policy responses are often imperfect and controversial. The goals of policy responses are typically: breaking up existing monopolies (horizontal split) Ease the effect of monopoly power on consumers. One public policy response is to enact antirust laws that investigate and prosecute corporations that engage in anti-competitive practices. Critics of antitrust laws argue that they: are typically politically motivated, cause more inefficiency than they create. One public policy response to natural monopolies is to allow the government to run them. Provide broader services set prices lower than unregulated monopolies. costs political pressure loss of profit incentive potentially leading to inefficiencies. Public policy responses: regulation if policy makers do not want public ownership, one common intermediate step is to regulate the behavior of natural monopolies takes the form of price control. Price regulated to socially optimal level which is marginal cost (p=mc) Monopoly is producing at a loss because p
