Date: April 14, 2011 Topic: Regulation and Deregulation Aim: How does the government protect and promote competition? Do Now: Read the article. Read the articleRead the article

Patents One way how the government can give a company monopoly power. One way how the government can give a company monopoly power. Gives a company the right to sell a new good for a certain period of time. Gives a company the right to sell a new good for a certain period of time. WHY ARE GENERIC DRUGS ABLE TO BE SOLD?

Technology and Change How did the movement from regular phones to cell phones end a possible natural monopoly? How did the movement from regular phones to cell phones end a possible natural monopoly? Cell phone companies do not need to invest in miles of wires connecting homes. Cell phone companies do not need to invest in miles of wires connecting homes.

Franchises and Licenses Franchise  a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. Franchise  a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. License  grant firms the right to operate a business. License  grant firms the right to operate a business.  The Mets permit Shack Shack to operate in Citi Field Z-100 needs a license to broadcast on FM. 

Exemptions From Anti-trust Laws The US Government allows professional sports teams an exemption from these laws. You would have teams trying to form all over the place!

Price Discrimination What do you think this means? What do you think this means? Can you provide any examples? Can you provide any examples? Based on the idea that everyone has their own max price that they will pay for a good. Based on the idea that everyone has their own max price that they will pay for a good. Ex: Senior Citizen day at Citi Field/Kids Eat Free. Ex: Senior Citizen day at Citi Field/Kids Eat Free.

Date: April 14, 2011 Topic: Regulation and Deregulation Aim: How does the government protect and promote competition? Do Now: Read the article.

Leading firms in the market form: a) a cartel b) merge with one another, b) or set the market price below their costs for the short term to drive competitors out of business. Leading firms in the market form: a) a cartel b) merge with one another, b) or set the market price below their costs for the short term to drive competitors out of business.

Government Regulates Competition

Government has the power to regulate practices if they give too much power to a company with few competitors. Government has the power to regulate practices if they give too much power to a company with few competitors. Examples: Microsofts Browser/Netscape Examples: Microsofts Browser/Netscape

Government uses antitrust legislation to break up existing monopolies. Government uses antitrust legislation to break up existing monopolies. Examples: Standard Oil Company and AT&T. Examples: Standard Oil Company and AT&T.

Government has the power to prevent the rise of monopolies Government has the power to prevent the rise of monopolies Blocks company mergers that might reduce competition and lead to higher prices Blocks company mergers that might reduce competition and lead to higher prices

Some mergers leave consumers better off Some mergers leave consumers better off 1) Lower overall average costs and lead to lower prices, 2) more reliable products or service, 3) more efficient industry. 1) Lower overall average costs and lead to lower prices, 2) more reliable products or service, 3) more efficient industry.

Deregulation weakens government control, antitrust laws strengthen it. Deregulation weakens government control, antitrust laws strengthen it. In some cases, the economic facts that created the need for regulation in the first place have changed. In some cases, the economic facts that created the need for regulation in the first place have changed.

How does the government protect and promote competition?