Question

In: Economics

In what ways might the behaviour of Microsoft, increasingly becoming a monopoly in the software and...

In what ways might the behaviour of Microsoft, increasingly becoming a monopoly in the software and operating systems market, be deemed to be:

(i) against the public interest;

(ii) in the public interest

Solutions

Expert Solution

(1) Against the public interest.

monopolies can be a deterant to public interest in the following ways:-

  • Monopolies dont produce at the equilibrium level or efficient scale suitable to all as in the case of perfect competition which results in efficient market outcome.
  • They dont maximise the consumer surplus and their ineffieciency leads to the creation of deadweight loss to the market.
  • barriers to entry leads to no fair competition .
  • The demand for the monopoly goods like that of microsoft is inelastic because of the ecosystem created by them due to which they can charge higher prices.
  • Monopolist charge higher prices than the equilibrium price and even price discriminate and maximise their profits rather than maximising comsumer surplus.

(2) In public interest

There are far less advantages than disadvantages of a monopoly as it usually has the goal of profit maximisation in mind and they dont usually work in public interest. Some points are:-

  • the huge profits that they earn helps them to do more RESEARCH an DEVELOPMENT work and bring new innovations that may help the people immensely which may later trickle down to all the masses
  • Since they have to reduce price to sell more units of output, they cant charge any price they wish to even though price will be higher.
  • As the product requires huge costs and human resource to develop, it is better for a monopoly to handle such goods as they can provide them consistently

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