Answer to Question #98721 in Microeconomics for keke

Question

(a) Look around you at industries/product that you see in the marketplace and identify at least one that you think is a monopoly. (Do NOT use a public utility or other natural monopoly) Do you think that, as suggested in the book, prices are higher and output lower with a monopolist than with a highly competitive firm?
(b) Can you think of instances in which a monopoly has been exposed or opened up to more competition and prices have gone down and quantity of output gone up as a result? Be specific in your answer.
(c) Consider a specific product in the garment industry. How close is it to a monopoly for specific items, maybe in specific cities or neighborhoods?

Answer 1

(a) Any local natural gas company or DeBeers company are monopolies. Prices are higher and output is lower with a monopolist than with a highly competitive firm, because in such case it maximizes its profits.

(b) A monopoly can be opened up to more competition, prices can go down, and quantity of output can go up in case of abolition of exclusive license for only one firm.

(c) The garment industry can be close to a monopoly if it produces exclusive clothes or if it is the only firm in the city.