Why would government intervene in a monopoly market?
The government tries to combat market inequities through regulation, taxation, and subsidies. Governments may also intervene in markets to promote general economic fairness. Examples of this include breaking up monopolies and regulating negative externalities like pollution.
Why are monopolies bad for the economy what were early examples of US monopolies?
With higher prices, consumers will demand less quantity, and hence the quantity produced and consumed will be lower than it would be under a more competitive market structure. The bottom line is that when companies have a monopoly, prices are too high and production is too low.
What is Smith’s attitude toward monopolies and why?
“The pretence that corporations are necessary for the better government of the trade, is without any foundation. Much later in Wealth of Nations, Smith wrote that such monopolies grow so inefficient that they would be incapable of survival without government favoritism.
How do monopolies help the economy?
Firms benefit from monopoly power because: They can charge higher prices and make more profit than in a competitive market. The can benefit from economies of scale – by increasing size they can experience lower average costs – important for industries with high fixed costs and scope for specialisation.