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DPQ
DPQ?
Digitally Powered Quad Deliberately Pruned Quince Delicious Pepperoni Quiche Deadly Poisonous Quiver Dave Purposely Quit Dreaded Pop Quiz
DPQ
Digitally Powered Quad Deliberately Pruned Quince Delicious Pepperoni Quiche Deadly Poisonous Quiver Dave Purposely Quit Dreaded Pop Quiz
Big Business and Government
What is a monopoly?
What is a monopoly? Monopoly: one seller. Examples, old
regional phone companies, Alcoa in old days, railroads in old days. Could even by a tiny store if it’s the only one around... i.e., da boyz ‘nade stand (for a fleeting moment)
Monopolies Monopoly causes harm not just by
charging prices higher than they would be with competition, it also affects the total wealth of an economy
Monopolies Monopoly causes harm not just by
charging prices higher than they would be with competition, it also affects the total wealth of an economy
Monopolies cause consumers to buy less at the higher price and cause inefficient use of scare resources that have alternative uses
Monopolies Monopoly causes harm not just by
charging prices higher than they would be with competition, it also affects the total wealth of an economy
Monopolies cause consumers to buy less at the higher price and cause inefficient use of scare resources that have alternative uses
Luckily, monopolies almost impossible to maintain without government protection
More on Monopolies
But they do exist: just take a taxi in New York… or try to, especially in the theater district on a rainy night at 11 p.m.
More on Monopolies
But they do exist: just take a taxi in New York… or try to, especially in the theater district on a rainy night at 11 p.m.
If cabs and drivers were freely allowed to compete, fares would come down and there would be more prosperity
What’s an oligopoly?
What’s an oligopoly?
Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly
What’s an oligopoly?
Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly
Examples: Four companies control 89% of U.S. wireless market (AT&T, Verizon, Sprint, T-Mobile)
What’s an oligopoly?
Oligopoly: a small number of sellers who may cooperate with one another in setting prices; can produce results similar to a monopoly
Examples: Four companies control 89% of U.S. wireless market (AT&T, Verizon, Sprint, T-Mobile)
Usually defined by having xx% of market share
What’s a cartel?
What’s a cartel? Cartel: an international syndicate,
combine or trust formed specifically to regulate prices and output in some field of business
What’s a cartel? Cartel: an international syndicate,
combine or trust formed specifically to regulate prices and output in some field of business
OPEC (Organization of Petroleum Exporting Countries) is the classic cartel
What’s a cartel? Cartel: an international syndicate,
combine or trust formed specifically to regulate prices and output in some field of business
OPEC (Organization of Petroleum Exporting Countries) is the classic cartel
But even OPEC cannot control oil prices... consumers respond to higher prices, OPEC members cheat, alternate fuels, technology such as Prius
Anti-Trust Laws
Anti-Trust Laws
Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments
Anti-Trust Laws
Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments
Intent was to prevent monopolies and cartels from artificially raising prices
Anti-Trust Laws
Some huge biz organizations were known as trusts, hence “anti-trust” laws passed by governments
Intent was to prevent monopolies and cartels from artificially raising prices
Sherman Anti-Trust Act of 1890:
Sherman Anti-Trust Sherman: Not specifically intended to
prevent the dominance of an industry by a specific company. Any company that "got the whole business because nobody could do it as well as he could" would not be in violation of the act.
Sherman Anti-Trust
The law attempts to prevent the artificial raising of prices by restriction of trade or supply. In other words, innocent monopoly is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not.
Anti-Trust Laws, Take 2
However, we always look at ________ not intent
Anti-Trust Laws, Take 2
However, we always look at ________ not intent
And as you read……….. Yep, business soon learned to lobby government to use anti-trust laws to restrict competition
Anti-Trust Laws, Take 2
However, we always look at ________ not intent
And as you read……….. Yep, business soon learned to lobby government to use anti-trust laws to restrict competition
Some of the most famous anti-trust cases involved business that charged lower prices
More Anti-Trust Stuff
Morton Salt, Borden milk, Microsoft giving away Internet Explorer
More Anti-Trust Stuff
Morton Salt, Borden milk, Microsoft giving away Internet Explorer
Problem is the issue of how much of the market a company “controls”
More Anti-Trust Stuff
Morton Salt, Borden milk, Microsoft giving away Internet Explorer
Problem is the issue of how much of the market a company “controls”
In actuality, in a free market, competition will dictate your market share, if you’re really efficient it can get quite large... iPod, Google
Anti-Trust redux Consumers win when companies like
Wal*Mart lower prices, but benefits gets lost in the confusion
Anti-Trust redux Consumers win when companies like
Wal*Mart lower prices, but benefits gets lost in the confusion
Also forgotten is that alternate products can substitute when prices get too high… i.e., limits on newspaper ownership in one city are absurd with internet, news radio, etc.
Anti-Trust redux Consumers win when companies like
Wal*Mart lower prices, but benefits gets lost in the confusion
Also forgotten is that alternate products can substitute when prices get too high… i.e., limits on newspaper ownership in one city are absurd with internet, news radio, etc.
Key to monopoly is not market share, but the ability to keep others out
Regulatory Commissions
Regulatory Commissions
ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc.
Regulatory Commissions
ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc.
Functions are nearly impossible to do properly
Regulatory Commissions
ICC, Public Service Commissions, SEC, FDA, EPA, FEC, FCC, etc. etc. etc. etc.
Functions are nearly impossible to do properly
Most onerous with power companies
Regulatory Commissions
Only the actual functioning of the market could reveal what the price should be, with less efficient firms being eliminated by bankruptcy
Regulatory Commissions
Only the actual functioning of the market could reveal what the price should be, with less efficient firms being eliminated by bankruptcy
Cost of electricity can vary tremendously… time, fuel sources
Regulations under Obama Tremendous increase in number of
agencies and regulations under Obama and Democrat Congress
Regulations under Obama Tremendous increase in number of
agencies and regulations under Obama and Democrat Congress
New ‘super’ consumer agency is regulating ATM fees, checking costs, profit margins... turning banks into regulated utilities
Regulations under Obama Tremendous increase in number of
agencies and regulations under Obama and Democrat Congress
New ‘super’ consumer agency is regulating ATM fees, checking costs, profit margins... turning banks into regulated utilities
EPA is proposing regs that will cost trillions and ship millions of jobs overseas
Regulations under Obama The Center for Health Transformation,
founded by Newt Gingrich, recently estimated that the new health-care law created as many as 159 new offices, agencies and programs. Republican staffers on the Joint Economic Committee determined that there were new 47 bureaucratic entities.
Regulatory Commissions
In practice, regulated business use the commissions to keep out competitors, thus preventing lower prices... ICC protecting trains from truckers
Regulatory Commissions
In practice, regulated business use the commissions to keep out competitors, thus preventing lower prices... ICC protecting trains from truckers
Remember: cheaper to ship blue jeans from Taiwan to Dallas, than to ship them from El Paso to Dallas
Assignment for Nov. 9
Read and study Chapter 8 of Basic Economics: “An Overview”
Review chapters 5-8 There will be a Test on Chapters 5-
8!!!!!!!!!
Assignment for Nov. 9
Write a 350-word paper. The Federal Communications Commission is considering regulating the Internet for the first time via an effort known as “net neutrality.” Based on Dr. Sowell’s teachings: do you think this is a good idea and what will like occur should “net neutrality” be adopted?
Remember: no class next week
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