What is a real life example of a firm operating as a monopoly?

Question

What criteria makes the firm a monopoly and what causes the firm to not charge excessively high prices for their product? Be specific about governemnt regulation or consumer reactions to increases in prices.

Answer 1

Ok a firm can only be a monoploy if it produces a product for which there is no substitute. Monopolies can set any price they want but to maximise their profits they produce where marginal revenue equals marginal cost. They cannot charge excessively high prices otherwise people will not consume the good. For example would you pay $1000 a month for phone service? Probably not, so prices have to be set within reason. Government regulations include the sherman act sec 2 which says a firm cannot attempt to monopolize a market. The DOJ is resposible for enforcing anti-trust (monopoly) laws. There are also industry specific regulators such as FERC which regulates the power industry. Phone companies cable companies utility companies are all REGULATED monopolies, they are allowed to operate as monopolies as it is more socially benificial, but they have limits set on where they can set prices, one example is that price must be set at average cost plus a profit margin defined by regulators instead of allowing the monopoly to set prices equal to MR, MC.

Answer 2

I can't help you with government regulations, but I did live during a time when all American telephone companies were part of AT&T, Ma Bell, as we used to call it. It was eventually judged a monopoly and broken up into regional and local companies in the mid seventies, I believe.

You had to go through Ma Bell for phone service, you had to rent and couldn't own your own phone. You could only get your phone from Bell and most of them were manufatured by a company called Western Electric. For a long time the joke was that you could have your phone in any color you wanted as long as it was black.

People hated them with a passion. The rates were ridiculous, especially long distance. The service was poor, they treated you like they were the only game in town because they were. If you went in to pay a bill, the lines were long.

Even after the break up, it took years to get to where we are now, with lots of choices.

Sorry I can't help you with regulations.

Answer 3

De Beers. They own about 90% of the diamond supply worldwide. But due to anti-monopoly laws, they are not allowed to sell inside the US, and must work through distributors.

Answer 4

Phone companies have a natural monopoly, because it wouldn't make sense to have two sets of telephone wires in a town.

Answer 5

when there are no alternatives in your area for the same service. An example is in Las Vegas we have to buy our electricity from Nevada Power there is no other option, that is a monopoly.

Answer 6

Microsoft

Answer 7

your local electric company could be one! -- most are regulated by a public service commission or another agency. So increases must be voted on by a panel or sometimes even voters

Answer 8

The cable companies.

Answer 9

WAL MART