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Monopoly   Term Paper ID:27715 Click to get this paper

Essay Subject: Defines & discusses types of monopolies, & uses AT&T as an example.... More...

6 Pages / 1350 Words 3 sources, 10 Citations, TURABIAN Format $24.00 Return to List of Papers

Paper Abstract: Defines & discusses types of monopolies, & uses AT&T as an example. Paper Introduction: Monopoly Introduction A monopoly is a single firm that produces a product for which there is no close substitute and which dominates its market (Byrns, 1987). This means that there are no other firms that make a similar product (or service). Consequently, the monopoly firm constitutes the entire industry, and makes for a 'pure monopoly.' A buyer who wants this particular product must either buy it from the monopolist or do without it. 'Pure monopolies' are relatively rare, but they do exist (Byrns, 1987). Local electric, gas, and water utilities are good examples, since they produce a product for which there are no close substitutes. But a firm's degree of monopoly may vary Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Also,both types of firms maximize profits when marginal cost equals marginalrevenue. On the other hand, the production andcost curves of a monopoly are similar to that of a competitive firm becausethe monopoly must purchase its variable and fixed factors in the inputmarkets and then produce a product, much like a competitive firm. However, in breaking up, AT&T also shed heavy handed governmentregulation and, in turn, was allowed t enter new, high-techtelecommunications fields. Hence, the government grants such monopoliesan exclusive right to operate, in return for which the government may alsoimpose standards and requirements pertaining to the quantity and quality ofoutput, geographic areas of operation, and the prices or rates that arecharged. Local electric, gas, and water utilities are good examples, sincethey produce a product for which there are no close substitutes. Consequently, the monopoly firm constitutes the entire industry,and makes for a 'pure monopoly.' A buyer who wants this particular productmust either buy it from the monopolist or do without it. Glenview, Il: Foresman.Kirkpatrick, D. In doing so, the companydivided into seven regional phone companies, the "baby Bells," leavingAT&T with the long-distance business, which it dominated, and the phoneequipment manufacturer, Western Electric. MonopolyIntroduction A monopoly is a single firm that produces a product for which there isno close substitute and which dominates its market (Byrns, 1987). AT&T has the plan. The net result is that maximum profits occur at apoint of less output and higher price than for competition. Specifically, various benefits from divestiture have accrued to AT&Tsince 1984. Similarly, railroads, buses, taxis, and airlines are not puremonopolies, but they are partial ones depending on the extent to whichbuyers can substitute the products/services of such industries in meetingtheir transportation needs. Economics. Also, thefirm's stock price has risen steadily (Kirkpatrick, 1995). In addition, its management became more dynamicand modern, catering to the free market rather than government bureaucrats. Mostsignificantly, the telecommunications (formerly 'telephone') industry hasbecome vastly more competitive and high-tech in the wake of new companies(and AT&T) offering a huge number of new products and services. But afirm's degree of monopoly may vary among markets. The Clayton Antitrust Act of 1914 is another landmark US law thatdeals with monopoly (Byrns, 1987). 11-17. 85-9 .Kirkpatrick, D. (1995). The law is particularly concernedwith misleading and false advertising. (1987). There have also been several otherantitrust laws created since 1914 which deal with various specific problemsof competition in the marketplace.How Monopoly Works Under competition, the seller has little control over price, thedemand curve is elastic, and profits are maximized when marginal revenue(price) equals marginal cost (Byrns, 1987). AT&T exemplified a 'natural monopoly,' which is legally established bythe federal or state government, usually when either one or both of twoconditions exist within an industry: The first is if there are increasingeconomies of scale over a wide range of output so that one firm can supplythe market more efficiently than two or more firms; the second is whenunrestricted competition among firms in the industry is deemed by societyas undesirable (Byrns, 1987). Could AT&T rule the world? (1995). As a result, company employmentdecreased by 14 , jobs, and the firm lost about thirty percent of thelong-distance business to new telecommunications companies like MCI andSprint. Finally,interlocking corporate directorates (such as people on the boards ofcompeting firms), and intercorporate stockholdings (such as the purchase ofshares by one firm of a competitor) are illegal if they "substantiallylessen the competition." The Federal Trade Commission Act of 1914 created the Federal TradeCommission (FTC), which enforces and monitors the marketplace in terms ofmonopolistic practices (Byrns, 1987). Fortune, pp. Violation of the Act ispunishable by fine and/or imprisonment, and persons injured by violatorscan sue for triple damages. Fortune, pp. Secondly, it tends to retard innovationand technological progress, which is also inefficient for the macroeconomy.AT&T In 1984, AT&T, the former telephone monopoly, was ordered to divest bythe federal government (Kirkpatrick, 1993). Monopoly is undesirable from a macroeconomic viewpoint for two reasons(Byrns, 1987). Thus, thebreakup of the old AT&T monopoly a decade ago has resulted in greaterefficiency for both the company itself and the telecommunications industryas a whole.Chart One[pic]Chart Two[pic][pic] BibliographyByrns, R. First, it outlaws 'pricediscrimination,' or the charging of different prices to different customersfor the same product, which tend to lessen competition or create monopoly.Allowable exceptions are: 1) when products are of different grade, quality,or quantity; 2) or when justified by economies of scale, quantitydiscounts, different transport costs; or 3) in order to meet competition.Another provision of the law makes illegal 'exclusive' or 'tying'contracts, which compel a customer not to buy from a competitor. The first, as previously indicated, it is characterized byless output and higher prices relative to competition, which means lessthan optimum aggregate efficiency. For instance, theelectric company has a monopoly in the production of electricity forlighting purposes, but for heating its product may compete with gas, coal,and fuel oil sold by other firms. Thismeans that there are no other firms that make a similar product (orservice). In contrast, under monopoly,the seller is the industry, exercises control over price, and faces aninelastic (vertical) demand curve. 'Pure monopolies' are relatively rare, but they do exist (Byrns,1987). An electric company may consequently bea 'pure monopoly' in the lighting market, but a partial one in the heatingmarket. A major one has been lower long-distance rates for customers.In addition, a vast array of new, higher-tech telecommunications productsand services has become part of the company's product line. Public utilities are classic examples of such 'naturalmonopolies.'Antitrust Laws The Sherman Antitrust Act, passed in 189 and still the major anti-monopoly law in the US, declares as illegal: 1) any contract, combination,or conspiracy in restraint of trade that occurs in interstate or foreigncommerce; and 2) any monopolization or attempt to monopolize, or conspiracywith others in an attempt to monopolize, any portion of trade ininterstate or foreign commerce (Byrns, 1987). However, the key difference is that, for a monopoly, marginalrevenue is not price. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.