Market Failure #3 Monopolies

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Presentation transcript:

Market Failure #3 Monopolies

Government in Action: Antitrust Laws Legislative Executive Judicial

WHAT ARE ANTITRUST LAWS? Why are monopolies a Market Failure? Laws designed to prevent monopolies and promote competition. After the Civil War, advances in technology and transportation lead to national markets. Eventually only a few firms began to dominate industries: Railroads, Steel, meatpacking, coal, etc. Why are monopolies a Market Failure? Monopolies destroy the key ingredient of the free market system- Competition. To fix this MARKET FAILURE the government must get involved.

WHAT DOES THE GOVERNMENT DO? Legislative Branch Passed laws designed to stop monopolies Sherman Act of 1890- “Every person who shall monopolize …or conspire to monopolize…shall be deemed guilty of a felony.” Executive Branch The Federal Trade Commission must approve all corporate mergers. (Like AT&T and…) When firms use anti-competitive tactics the Department of Justice files suit against them. Judicial Branch Supreme Court finds the firm guilty or not guilty and assigns a punishment.