![]() ![]() The Sherman Act does not define monopoly, but it is well-established that it involves any firm that has a power to significantly affect prices and exclude competition in a particular market. The Sherman Antitrust Act is the broadest of the antitrust laws, prohibiting practices whose main objective is to create or maintain a monopoly. In the United States, the 2 major antitrust laws are the Sherman Antitrust Act, passed in 1890, and the Clayton Antitrust Act, passed in 1914. Moreover, many of the legal remedies available in different countries will be similar, since they address similar situations. Although this article discusses United States antitrust law, the basic principles will still apply worldwide, since monopolies operate much the same in most modern economies. ![]() The main purpose of antitrust laws is to prevent business practices that either create or maintain a monopoly. operating the monopoly as a public enterprise.regulating the prices that the monopoly can charge.removing or lowering barriers to entry through antitrust laws so that other firms can enter the market to compete.There are 3 major methods to increase the benefits of monopolies to society: Hence, governments regulate monopolies with the objective of benefiting societies more than would be the case if the monopolies maximized their profits. Monopolies always reduce the economic wealth of society in many ways. ![]() With competition, they must take those risks otherwise, they would lose market share and may even become bankrupt eventually. Indeed, innovation may be shunned because there are always risks with new ideas and the complacent employees do not want to upset the status quo. And the lack of competition makes the employees of the monopoly complacent. Furthermore, allocative efficiency is reduced, not only because desired products are not produced in the quantity that could be produced considering the costs of production, but also because monopolies often don't produce a product that would be most desirable by society, because they do not have to worry about competition, so there will not be another company producing a better or more desirable product that could possibly take market share away from the monopoly. And because there is a deadweight loss from imperfect competition, the economy produces less because of the monopoly. Monopolies, on the other hand, set prices to maximize their own profits, by decreasing supply, increasing their own producer surplus at the expense of both consumers and society. Consumer surplus is the additional benefit enjoyed by consumers over the price that they paid for the product. Monopoly Regulation › Economics Monopoly RegulationĬompetitive firms sell at market prices, which maximizes both consumer surplus and total surplus. ![]()
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