Government Regulation

Topics: Monopoly, Regulation, Economics Pages: 4 (1285 words) Published: October 29, 2012
The purpose of this paper is to assess different types of government regulations, how those regulations affect current market structures while defining the different types of market structures and finally what provisions and laws have been put in place to protect consumers and society from big business and firms choices.

Industrial regulation is the government’s attempt to enact laws designed to prevent firms from participating in bad monopolistic practices and to promote competition in the market space. The reason industrial regulation exists is to keep an eye on firms by making sure monopolies don’t start, however if they do or currently exist regulations are put in place to monitor prices and products to make sure society and consumers are not taken advantage of. Regulation has been put into place to inhibit growth of monopoly by making restraint of trade illegal and by imposing the possible threat of felony charges with the intent to conspire. Industrial regulation places limits on the prices and rates firms can charge within a selected industry. These regulations attempt to produce or avoid outcomes which may or may not otherwise occur. Pure monopolies/monopolies and oligopolies are affected by government regulation in the form of economies of scale, control of patents, limited availability of licenses and strict consequences for price fixing and collusion.

To expand on the market structure of the entities affected by industrial regulation; pure monopolies exist when economies of scale are so extensive that a single firm can supply the entire market at a lower average total cost than could a number of competing firms. (McConnell, Brue, Flynn, 2012, pg.382) The reason monopolies are affected by regulation is to keep from one huge firm dominating the market space and choosing to pass huge operating costs onto consumers and increasing prices to their benefit. Oligopolies are comprised of a few number of large firms and the reason they are affected by...
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