ECON 200 Lecture Notes - Lecture 17: Clayton Antitrust Act, Natural Monopoly, Deadweight Loss
12 Nov 2018
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Monopoly charges a price above socially optimal price (mc). Monopoly generates surplus less than socially optimal level (it creates dead weight loss) A natural monopoly refers to a market where a single rm can produce the entire quantity demanded in market at a lower cost than multiple rms. Small, usually constant avc (so, avc = mc) Atc is decreasing for the entire demand in the market (economies of scale exists). It is less costly if we let only one supplier to supply. We try to manage monopolies to reduce the harms. The goals of policy responses are typically: (cid:12254) break up existing monopolies (horizontal split) (cid:12254) prevent new monopolies from forming. (cid:12254) ease the e ect of monopoly power on consumers. One public policy response is to enact antitrust laws that investigate and prosecute corporations that engage in anti-competitive practices: antitrust laws (cid:12254) sherman antitrust act of 1890. (cid:12254) clayton antitrust act of 1914.
