Big Business and Government

Competitive free markets are not the only kinds of markets, nor are government-imposed price controls the only interferences with the operations of such markets. Monopolies, oligopolies, and cartels also produce economic results very different from those of a free market.

A monopoly means literally one seller. However, a small number of sellers-an oligopoly, as economists call it-may cooperate with one another, either explicitly or tacitly, in setting prices and so produce results similar to those of a monopoly. Where there is a formal organization in an industry to set prices and output-a cartel-its results can be like those of a monopoly, even though there may be numerous sellers in the cartel. Although these various kinds of non-competitive industries differ among themselves, their generally detrimental effects have led to laws and government policies designed to prevent or counter these effects. Sometimes this government intervention takes the form of direct regulation of the prices and policies of monopolistic industries. In other cases, government prohibits particular practices without attempting to micro-manage the companies involved. The first and most fundamental question, however, is: How are monopolistic firms detrimental to the economy?

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