Question

Most cities are served by only one cable company. How might this monopoly power affect prices and services

Answer 1

The cable industry is a patchwork of micro-monopolies. Or more accurately, natural monopolies: situations of little or no competition that doesn't break enough laws to get regulated. A natural monopoly occurs when it's so expensive to enter a market that it doesn't make sense for a competitors to come in. With cable TV, there's a massive fixed cost to enter a new market putting in new cable lines.

Cable company Monopoly providers can and do raise prices, delay investments, and provide sub-par quality of service.

The goal of a monopoly in developing a pricing strategy is to maximize profits. The market price is determined by demand for goods or services. The monopoly wants to set the highest price possible and still be able to sell all goods manufactured. and lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price.