Question

5. Discuss the consequences of a having a monopoly-dominated economy on GDP, Employment, standard of living, quality of goods and services.

6. Is having antitrust legislation justified? Base your discussion on the above findings. Name a few of these legislations in the US.

Answer 1

1. Monopoly is the market for one seller. It has negative consequences on GDP ,employment standard of living and quality of goods and services. Monopoly make the market inefficient and less innovation , they do not have to face with any other firms. It is the sole producer in the market. It may creates market failure. Monopoly always try to restrict the production and supply of output at higher prices. It charges higher prices than competitive market by supply lower level of output. Reduction in output reduces the production level in economy. Lower production level results lower demand for labor. As a result employment will fall due to restriction of output. It results fall in real GDP of an economy. It will create unemployment in the economy. Thereby income level of workers will fall. Consumers can't able to purchase all goods that they want because low level of income. And they always fix higher prices. It reduces consumer surplus and economic efficiency. Hence it results reduction in standard of living. Monopoly not only raises the prices, but also they can supply inferior or low quality goods and services. Since they can raise the prices as they want. Because there is no close substitutes for monopoly product. Even thy increase price, it will not affect the , market demand 2. Yes there is antitrust legislation against the monopoly . Antitrust legislation is the competition laws developed by US federal government to protect consumers from monopolies . The few antitrust legislations in US are following 1.The Sherman Antitrust Law 2. The Clayton Act 3. The Federal Trade Commission Act 4. The Robinson-Patman Act 5. Celler-Kefauver Act