Question

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Answer 1

1. Identify a firm that operates in your community that you think has a significant
amount of monopoly power. Explain why you chose this firm.

2. At one time, the American Telephone and Telegraph Corp. (AT&T) had a great
deal of monopoly power and earned large profits. In recent years AT&T has lost
money. What happened to AT&T’s monopoly power?

3. Although individual farmers do not purchase advertising for their
products, it is common for groups of farmers to join together to do this. In New
York, for example, the Upstate Milk Cooperative collects funds from thousands
of dairy farmers and uses the money to buy advertisements for milk products.
Explain why this makes sense. What are the farmers trying to accomplish?

4. Between 1880 and 1900, the Standard Oil Company came to control
almost 90 percent of the production of oil products in the United States. It did
this by buying up or driving other firms out of business. With this monopoly
power, the firm’s owners were able to earn as much as a 20 percent profit on
the value of the firm’s assets, such as its refineries, pipelines, etc. Much of the
firm’s profit was used to develop new technologies that, according to the owners,
contributed to lower prices. In your opinion, is it possible for monopolies to
be good for consumers? Explain your answer.