![]() ![]() In this chapter, we explore the opposite extreme: monopoly. Think about it this way: If you very much wanted to win an Olympic gold medal, would you rather be far better than everyone else, or locked in competition with many athletes just as good as you are? Similarly, if you would like to attain a very high level of profits, would you rather manage a business with little or no competition, or struggle against many tough competitors who are trying to sell to your customers? By now, you might have read the chapter on Perfect Competition. ![]() ![]() There is a widespread belief that top executives at firms are the strongest supporters of market competition, but this belief is far from the truth. How a Profit-Maximizing Monopoly Chooses Output and Price.How do monopoly firms behave in the marketplace? Do they have “power?” Does this power potentially have unintended consequences? We’ll return to this case at the end of the chapter to see how the tea and cotton monopolies influenced U.S. This leads us to the topic of this chapter: a firm that controls all (or nearly all) of the supply of a good or service-a monopoly. The South, wanting to secede from the Union, hoped to leverage Britain’s high dependency on its cotton into formal diplomatic recognition of the Confederate States of America. At that time, the Southern states provided the majority of the cotton Britain imported. Step forward in time to 1860-the eve of the American Civil War-to another near monopoly supplier of historical significance: the U.S. They refused to permit the tea to be unloaded, citing their main complaint: “No taxation without representation.” Arriving tea-bearing ships were warned via several newspapers, including The Massachusetts Gazette, “We are prepared, and shall not fail to pay them an unwelcome visit by The Mohawks.” By November, the citizens of Boston had had enough. The act continued the tax on teas and made the East India Company the sole legal supplier of tea to the American colonies. To help shore up the failing firm, the British Parliament authorized the Tea Act. In the spring of 1773, the East India Company, a firm that, in its time, was designated ‘too big to fail,’ was continuing to experience financial difficulties. This one steps into the past to observe how monopoly, or near monopolies, have helped shape history. Many of the opening case studies have focused on current events. ![]()
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