PUBLIC POLICY TOWARD MONOPOLIES

We have seen that monopolies, in contrast to competitive markets, fail to allocate resources efficiently. Monopolies produce less than the socially desirable quantity of output and, as a result, charge prices above marginal cost. Policymakers in the government can respond to the problem of monopoly in one of four ways:

• By trying to make monopolized industries more competitive
• By regulating the behavior of the monopolies
• By turning some private monopolies into public enterprises
• By doing nothing at all

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