Monopolies

Monopolies

            The term monopoly describes a business that offers goods and services that do not have close substitutes. Monopolies are caused by factors described as barriers of entry in the business environment. Barriers of entry describe restrictions or factors that dictate who can start a business and stay in it (Miller, 2015). Limiting entrance into certain lines of business through barriers of entry not only eliminates competition, but it also affects the prices that consumers pay for services and products. For instance, Millar (2015) argues that when the government limits the number of licenses issued to taxicabs, the prices that riders pay for taxicab services are also affected. .

The barriers of entry that give businesses monopoly power include governmental or legal restrictions, economies of scale, and having access to resources that do not have close substitutes. For instance, ALCOA (Aluminium Company of America) once owned a bigger portion of bauxite in the world (Miller, 2015). This meant that it could set prices that it wanted for its products. Large firms are also able to produce at the lowest costs, meaning that even the prices for their products can be low; lower prices can discourage competitors, thus leading to market domination. A business that enjoys large economies of scale is said to be in a natural monopoly. Such a firm is able to produce at very low prices that several other forms can achieve (Miller, 2015. Certain legal governmental or legal restriction can also lead to the creation of monopolies, such as strict licensing requirements, tariffs, etc.

Article Summary

The article was written by Sally Hubbard, and it is titled “Monopolies are killing the American Dream. We must keep them in check.” In the article, Hubbard (2019) argues that monopolies are squeezing wealth from the American people by using discriminatory, unfair, and unreasonable means. The author further argues that monopolies concentrate markets on a few markets or individuals, thus stagnating wages and decreasing labor competition. Because monopolies have a lot of market power, they hurt the economy by eliminating competition so that they can make exorbitant profits..

Relationship to Book Concept

The article is related to the concept of monopolies because it sheds more light on why monopolistic businesses must be regulated. It argues that if monopolies are allowed to operate without regulation, then they will use their powers to hurt the economy and fleece their clients of their money. Hubbard (2019) further states in his article that strategies must be put in place to ensure that monopolies employ fairness and transparency when dealing with their clients.

Impact of the Topic on me

From the topic, I learn that there is a need to subject monopolies to some scrutiny so that they do not discriminate their clients and to ensure they are fair and transparent. In the future, I will advocate for the removal of some of the barriers some barriers entry so as to allow competitors to venture into markets dominated by monopolistic businesses. Additionally, I will advocate for more strict laws to force monopolistic businesses to be fairer, transparent, and avoid exploiting their clients through means such as price discrimination. I think that for the playground to be equalized, anti-monopoly and strong anti-trust laws need to be implemented. It is not positive for just a few companies to have so much wealth because, just like political powers, such wealth will only be owned by a few companies or individuals. While limiting the powers of monopolies may not solve problems, I think that having policies to govern their operations is still necessary, and this is what I intend to advocate.

References

Hubbard, S. (2019). Monopolies are killing the American Dream. We must keep them in check. CNN Business. Retrieved from https://edition.cnn.com/2019/07/01/perspectives/monopolies-candidates-antitrust/index.html

Miller, R.L. (2015). Economics Today, 18th Edition. Pearson.