Question

How can the government regulate monopoly firms; what are the advantages and disadvantages of each governmental regulation?

Answer 1

One way in which the government can regulate Monopoly firms are that price capping method will the government gets to set a price which is lower than the equilibrium price of a monopoly and this can get to control the Monopoly from setting high prices another way of regulating monopoly yardstick competition where the government gives the Monopoly a little incentive in order to decrease their overall cost levels and that can indirectly decrease the price. Also there are other sorts of regulation method such as control of quality etc. There are many advantages of monopoly control or regulation when the prime advantage of it is reduction of price where the customers get to pay only the price that is affordable and also the demand for the product that increase with the reduction in price level and since certain Monopoly tend to be relatively elastic nature reduction in price ads on to the overall GDP of the country. however there are certain disadvantages of regulation of monopoly where the form can get to reduce the quality of the product with the level of price ceiling and this can hamper the life of the product which is not desired