Final exam - Lecture 2 Notes Flashcards
How to control monopolies?
Regulate
◦The point is to control the monopoly on what?
on how they run there businesses.
Nv energy was told to sell for a flat fee so it benefit the consumers. The government sets
the price (______/_____) Then they add 16% on top of that and they calculate what
there price should be.
(Percentage/Cost).
◦Capture
‣ Firms buy you after you regulate them to work for them.
◦Most rules and regulation is to protect who?
consumers
◦if we leave the monopoly alone they will restrict the output to increase the _____.
price
◦By regulating it helps the consumers but the agencies are more friendly to the people are
regulating them instead of the consumers to ______ them.
capture
Why would they have someone who regulated them?
◦They would rather have a person who already regulated them since they have work
experience than having someone who is an outsider.
Why does the businesses want to increase cost
since u get a percentage over cost
Why do we have monopolies?
Societal advantages.
Don’t want so many wires running for businesses rather just have one company who does it.
After allowing monopolies what do we do to stop them from doing bad things?
we regulate them
What’s another way on how we control monopolies
Kill
How does the U.S and Europe kill monopolies?
US = Anti-trust Europe= Competition policy
◦Trust
t means that all the companies in the industry get together decide what the price is
going to be or who gets what instead of there being competition they companies are
working together to maximizing there profits.
Why does competition help consumers?
it helps the consumer as the companies will have to compete against each other to be better than the other.
◦Sherman Act (1890)
‣ It allows you as a consumer to go after the companies instead of the government.
‣ You can sue as an individual if you think you’re damaged by a monopoly.
◦Sherman act did 3 rules
◦1. Illegal to be a monopoly
◦2. Illegal to attempt to be
◦3. Illegal to conspire to be
◦Clayton Act, Federal Trade Commission: Unions, Unfair or Deceptive Practices, Mergerse,
Interlocking Directors, etc.
‣ Unions cant not be monopolies they are exempt from monopolies
‣ Interlocking Directors
• Same directors of the same companies
• It forbids you to sit as a Directors of 2 companies
‣ federal trade commission
• There is responsible truth in advertisement
• Listeerine said it cures the common cold. Now it says it cleans germs
• The only people who are exempt from federal trade commission is politicians.
• They regulate merges. The 2 companies who want to merge together need to get
government permission
◦The supreme court creates the rule of reason.
‣ Suppose there is 2 gas stations in a town and one of it dies and the other one is the
only seller its not illegal but it is monopoly.
◦You cant just buy all your competitiors
What is another thing that the Sherman Act did?
Trouble damages
What are trouble damages?
the fine is three times the damage
Why does the Congress have the ability to control monopolies ?
Interstate commerce
Why is it that the government can set the speed limit?
interstate commerce
Why is it easy and bad for consumers to have a monopoly surrounding them?
It helps the consumers to have one company since it’s a lot easier to set up everything (wires, not having multiple trash companies, etc).
It’s bad since there is less benefits for consumers since less innovation and higher prices, etc.
What are exempt from the anti-trust laws?
Unions