Question

explain why you agree or disagee that all monopolies are created by the government

Answer 1

Yes, I agree.

While monopolies can form without government intervention and regulations, they cannot sustain in the long term without some sort of government protection or barriers to stop other competitors. While monopolies can form naturally, in case of a new product that serves a new category or if there are high, fixed costs to enter the market, it does not actually stop more competitors from entering the market.

If a monopolist has such a lucrative business model and keeps commanding prices that are much higher than the equilibrium, other businesses would be tempted to enter the market as well. True monopolies are rare, and while they may have a dominant position today, they can always be defeated by new competition. eg. IBM which was once dominant in the computer business, making upto 70% of all business computers worldwide, was defeated by Microsoft, which became the dominant player in the computer business. Now, Microsoft and Apple both hold major market share in the business due to their innovations. That was possible because the government did not protect IBM by raising barriers to entry or through government regulations and protections.

While factors like "first mover advantage", or high fixed costs of entry allow a company to become dominant, and then eventually turn into a monopoly, they do not guarantee that the company will enjoy a dominant or monopolist position forever. If a competitor manages to provide a good substitute at a cheaper rate, the company enjoying the monopolist position will lose market share as customers start shifting to the new product. If the monopolist does not improve and innovate their product, they will lose in the future, unless they have some sort of government protection or privileges granted to them.

Many monopolies and dominant businesses may even prefer if the government increased its regulations, and absorbing the extra costs imposed on them, if it means that smaller competitors who cannot absorb the extra costs are wiped out from the market. eg. Amazon and Walmart both support an increase in Federal Minimum Wage, because they know while they can absorb the extra costs incurred, smaller retailers and Mom-and-pop stores will not be able to afford to pay their employees a $15 per hour minimum wage, and will thus go out of business, which would, in the long run translate into more market share in the retail business for Amazon and Walmart.

So, while a monopoly may not need government intervention to form, it is government intervention (through various intended and unintended ways) that allow a monopoly to persist.