Monopolies are typically frowned upon in U.S. business, preferring more competit
ID: 1254900 • Letter: M
Question
Monopolies are typically frowned upon in U.S. business, preferring more competitive models. However, many industries are stillmonopolistic in our everyday dealings. In this discussion, name an example of a monopoly that you have encountered, and explain how this has affected you in your dealings with the company:What barrier did it possess that kept others from entering?
Why do you think the government allowed this monopoly to exist?
Consider which barriers are most likely, explain such an existence, and describe what benefit to society the government seems to believe such a monopoly will provide. Answers such as “Monopolies exist because the government is corrupt” theoretically lead to assuming all industries can become monopolistic in nature.
Explanation / Answer
Cox Cable has a monopoly in Gainesville, Florida. As a result, the quality of cable internet is low and the price is high. Cox's barrier is that it has a contract with Gainesville, Florida that makes it illegal for any other company to offer cable tv or cable internet. The government (Gainesville City Council) allows the monopoly to exist because each council member's campaign is heavily funded by Cox Cable. If we assume that the City Council isn't corrupt, then perhaps they allow Cox to exist as a monopoly because they think that competition would increase the cost of providing cable because it would decrease economies of scale. This would result in higher cable prices. But it would be odd to think this considering that cable prices are lower (and quality is higher) in cities that allow competition.