1. PREVENTING OR CONTROLLING MONOPOLY POWER

2. Natural Monopolies Public ownership Regulation Advantage:
can set prices based on efficiency rather than profit maximization
Disadvantages:
May be less efficient than privately owned firms
May not offer high quality products
May serve political interests—providing contracts or jobs to those with connections
Regulation
Prices—price ceiling set at socially optimal price, to achieve allocative efficiency
Profits—fair return price, allows normal profit
Add graphs here from p. 264, Krugman for AP

3. Industries Which Are Not Natural Monopolies
Regulate through antitrust policy: Government can attempt to prevent monopoly from arising, or break it up if it already exists.
Sherman Antitrust Act of 1890
Illegal to create contract that unreasonably restrains interstate trade
Outlows monopolization of any part of interstate commerce
Allows Department of Justice to bring civil claims and criminal prosecutions when the law is violated.

4. Clayton Antitrust Act of 1914, which outlaws:
Price discrimination
Anticompetitive practices, like exclusive dealing and tying arrangements
Anticompetitive mergers
Federal Trade Commission Act of 1914
Outlaws unfair competition, including deceptive acts
Created Federal Trade Commission to enforce the act
Outlaws price fixing, output restrictions, actions that prevent entry of new firms

5. Ignore it: Another approach to monopoly power is to allow natural market forces to destroy monopoly market positions.
For example: railroads destroyed the monopoly power of ships and barges in the l800s. Then trucks and planes destroyed the monopoly power of railroads.