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Economics Model Answers Nine - 2013 (view source)

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:(student MY) I think the government should regulate monopolies. Competition is always better. than just one person/firm taking over and raising the prices sky high and not giving any one else a chance. Competition is better for the market. It allows trade/buying/selling to continue normally. Everyone fighting for the lowest prices, and best quality.

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:(student CL) In my opinion, monopolies should be regulated by the government because the detriment of a monopoly's existence is worse than a government regulation preventing its growth. A monopoly is not good for the consumer because it can raise prices and lower output to take advantage of the consumers that have no choice but to pay the higher price. Monopolies can do this because there is no competition that can offer a lower price. Without any regulation, a monopoly could destroy all of its competition by buying those who offer lower prices. For these reasons, even though a government regulation may be bad for the free market, it still is not as bad as the continuation of an unstoppable monopoly.

8. Does the "deadweight loss" equal the "consumer surplus"? Explain the relationship.

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