Natural Monopoly and the need for Government Regulation
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Why does the MC curve shift by more than the amount of the subsidy you describe?
i really like your explaination sir
im pretty sure the examples you provided of natural monopolies exist through government regulations being an unnatural monopoly
Could you please explain
Dumping
Intertemporal price discrimination
Peak load Pricing
Two part tariff with one consumer and two consumer
Bundling
Reservation price
Tying
Advertising
https://youtu.be/eZMX_q-YLZY
A subsidy is needed which is the difference between PxMC and the ATC, to be allocatively efficient.
Name one free market monopoly and tell how it hurts the consumer?
My question is, " Why don't government himself run the industry instead of giving it to private organization with subsidies? "
Great working
Theoretical mumbo jumbo. If you believe this, then you fell for one of the biggest economic fallacies ever. And I don't need a bunch of theoretical graphs to explain it. It's so much more logical if you use critical thinking instead. There is no such thing as a natural monopoly. It's a fallacy. Why?
A monopoly is purportedly bad because it can exercise pricing power due to lack of competition. Even if we accept the premise of this position, in a free market the inevitable result of this behavior is more competition (someone will start another company and undercut prices). Therefore the only way to retain monopoly pricing power is to prevent competition. It’s not possible for competition to be prevented in a free market. If competition doesn’t exist, it is either because the company is not exercising its pricing power (i.e. selling at a loss or break-even, making it unattractive for competition to enter the market – and BTW, this benefits the consumer with lower prices) or because the company has no market (which would also suppress any desire to compete with it), and in either case there is no “harm” to anyone. If a company is suppressing competition by selling at a loss with the expectation that eventually it will apply its pricing power, there is nothing preventing others from executing the same strategy, and of course the strategy is short term. For example, if all the retailers in the country want to try to collude on pricing, let them. It will only last for a short time, as one of them will be able to make more money (and take more share) by breaking out of the collusion and lowering prices (same reason oil cartels don't work in the long run). There is no long term incentive to collude, and if they do, it's freedom of contract to do so, and another retailer could come in and undercut the group. Instead what happens in the long term is innovation. Note how retail went from local stores, to Wal-Mart to Amazon. Scale and service over time changed to bring prices down and service up. Many thought Wal-Mart was a "monopoly" or close to one. Then along came Amazon.
THE ONLY COMPANIES THAT EXERCISE MONOPOLY POWER ARE STATE-CREATED (the AT&T monopoly was entirely a government sponsored monopoly and had to be broken up because of lack of innovation). The force of the state physically prevents or suppresses competition and creates monopoly power (another example is the Federal Reserve – it has a monopoly on printing money and govt has granted it this power through the Federal Reserve Act). Note the Internet and companies around it are blossoming. Why? Because it's a free market with very little regulation and a lot of competition.
The first thing any successful company sees is competition from others. Any successful entrepreneur would admit to this fact. Price fixing just creates another weakness to compete against (the high price). But government interference or ineptitude can keep others from competing against the price fixing.
Many claim Standard Oil was a monopoly. It wasn't at all but it created our ridiculous anti trust law. Standard Oil was about freedom to contract, huge supply chain efficiencies that put small, inefficient producers out of business, and safer oil. See these five parts to the story of Std Oil which is very well researched:
https://www.masterresource.org/epstein-alex/vindicating-capitalism-standard-oil-i/
https://www.masterresource.org/epstein-alex/vindicating-capitalism-standard-oil-ii/
https://www.masterresource.org/epstein-alex/vindicating-capitalism-standard-oil-iii/
https://www.masterresource.org/epstein-alex/the-real-history-of-the-standard-oil-company-part-iv-pioneering-in-big-business/
https://www.masterresource.org/epstein-alex/capitalism-vindicated-standard-oil-part-v/
Regulation is immoral and interference by force. It is aggression against others. I also recommend the article and videos below. Note this is mostly based on logic and an understanding of human behavior, not just data and statistics. I haven't found anyone that can logically refute this position. Case closed.
Other materials:
https://mises.org/library/myth-natural-monopoly
ttps://mises.org/wire/capitalism-and-misunderstanding-monopoly
https://mises.org/library/antitrust-policy-both-harmful-and-useless
https://www.youtube.com/watch?v=WSVR9xJ-1Vc
https://www.youtube.com/watch?v=-q1fSNzYNhg
https://mises.org/library/net-neutrality-scam
https://mises.org/blog/ditch-net-neutrality-now
https://mises.org/library/peter-klein-net-neutrality-lie
https://mises.org/library/question-cable-monopoly
https://mises.org/library/why-public-utility-monopolies-fail
You sir , are an awesome Educator
What software do you use to doodle lessons?
so helpful thank you
how is it possible that the ATC continues to decrease after the point at with the D curve reached 0?
Hey, I got an A (87%) for CIE AS level eco thanks to u
How big will the monopolists profit be after regulations are imposed? If profit is the same as before, people are just paying him the monopoly price indirectly through tax money
By far, better than my microeconomics lectures at university.
So I am a bit confused about one thing. Diagrammatically, it seems possible for 8 different firms to make profit. It's because if you take a look at the diagram, at 6:10, we can extend the line above and the distance between the point in the ATC and the tip of the line of D can be profit. Now theoretically this shouldn't be the case. Clarification?
my apartment in Zurich Switzerland with my 2 ferraris and mercedes you know – Jason Welker
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Oooh. How about oligopolies and the fact we're all screwed over by… well, a lot of oligopolies?
I have been watching your videos for a few months now as an IB diploma candidate. I question the fact that marginal cost will shift down, while I believe that it should stay where it is at. Because the MC is the derivative of ATC. Therefore each addition of unit of output will remain the same, and so will the MC curve. Am I correct?
EXCELLENT
You're a saint ! God bless you
The caveat is that "natural monopolies" are only theoretical and do not exist in real life.
https://mises.org/library/myth-natural-monopoly
So, the consumers still wind up paying more because they have to subsidize the monopoly.
Great video, thanks
great vid.ignore tht johannes. he or she is crazy