Question

Let’s say there is a company that benefits from the protection of state and local governmental agencies. And that company funds its budgets through property taxes. The product that the company creates is one that every person, from 5 to 18 years old, who lives within its service territory, is required to purchase. This protected company can open a facility anywhere it wants. However, competing companies, because they are denied the right to finance their activities through taxation, must ordinarily charge higher prices than the protected company charges. In addition, competing companies must have licenses/permits to

operate, must be audited by state agencies, must follow required standards and must market their products to attract customers. Customers of these competing companies must not only pay for the higher prices but also pay property taxes to fund the protected company.

a. Is the protected company a monopolist? Can you name such a protected company?

b. What should consumers do to minimize, or even to break up, the benefits enjoyed by the protected company?