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Market structure (Monopoly (legislation to limit monopoly power…

- - - - good:
        
        the regulated monopolist produces a larger Q and sells it at a lower P than the unregulated monopolist who makes abnormal profit
        
        since P=ATC, the monopolist earns normal profit, and so does not make any loss
        
        Since P is lower and Q is higher, consumer surplus increases
      - bad:
        
        Productive efficiency is not achieved
        
        allocative efficiency is not achieved, so there is welfare loss
        
        since the firm is guaranteed a price P=ATC, it has no incentive to keep its costs as low as possible
  - - - resource misallocation results, due to lower production than the social optimum level, leading to welfare loss and allocative inefficiency
      - consumer surplus decreases which is taken by producer surplus; the monopolist gains at the expense of consumers
    - - the profit-maximizing monopolist cannot achieve productive and allocative efficiency
        the monopolist faces an additional type of inefficiency arising from its lack of competitors
  - - - bad:
        
        vague laws allow for different interpretations of anti-competitive behavior
        
        there are differences between countries and changes over time on how much monopoly power is too much, and on how large mergers should be depending on political views
        
        there are different degrees of enforcement of laws
        
        there are major difficulties in finding evidence of collusion in oligopoly
      - good:
        *legislation is essential since greater competition is in the interests of consumers and society, leading to greater quantities produced and lower prices, while monopoly power leads to allocative inefficiency and welfare loss
    - - good:
        
        government ownership allows the government to regulate natural monopolies forcing them to lower prices and increase quantities produced in the interests of consumers, reducing allocative inefficiency and welfare loss
      - bad:
        
        government ownership often leads to inefficiencies and higher than necessary costs of production, as governments are not driven by the goal to maximize profits
    - - good:
        
        increased imports into a country increase competition faced by domestic firms with foreign producers; domestic firms with a substantial degree of monopoly power are forced to lower prices thus facing reduced monopoly power
      - bad:
        
        inefficient domestic firms may go out of business, with a corresponding increase in unemployment