3.2. Regulate Monopolies

1. Put your phone in your bag!

PUT YOUR
PHONE IN
YOUR BAG!
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

2.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

3. One App Store Controls Everything

ONE APP STORE CONTROLS EVERYTHING
Imagine only one company controls all apps
Developers must pay whatever fee it sets
Competing apps can be blocked
How would this affect prices and innovation?

4.

Week #1: Foundations: Incentives & Trade-offs
Week #2: Margins & Gains from Trade
Week #3: Exchange & Transaction Costs
Week #4: Firms, Profits & Income
Week #5:Value, Wealth & Sources of Progress
Week #6: Market Forces & Unintended Effects
TOPIC OF THE WEEK:
Week #7: Institutions that Support Progress
Week #8: Midterm Exam [20 Oct – 24 Oct]
Week #9: Macro Stability & Policy
Week #10:Trade & Part 3
Week #11: Government’s Basic Roles
Week #12: Political Economy & Rules
Week #13: Government Support Programs
Week #14: Planning & Competition
Week #15: Final Exam [15 Dec – 19 Dec]

5.

DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

6. Regulate Monopolies

REGULATE
MONOPOLIES
ELEMENT 3.2

7. Review

REVIEW
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

8. Why Protection Matters

Secure rights motivate investment
WHY
PROTECTION
MATTERS
Hard work pays off so people innovate
Startups thrive when ideas are safe
Without security, investment collapses

9. Government’s Productive Function

GOVERNMENT’S PRODUCTIVE FUNCTION
Some goods are hard for markets to provide
Government ensures basic public goods
Stable money boosts confidence
National defense must be publicly provided

10. Limited Government, Maximum Prosperity

Government should focus on core functions
LIMITED
GOVERNMENT,
MAXIMUM
PROSPERITY
Hard to measure costs in public projects
Too much government leads to waste
Markets handle most goods efficiently

11. Regulate Monopolies

REGULATE
MONOPOLIES
ELEMENT 3.2

12. Learning Objectives

See why competition matters for prices and
innovation
LEARNING
OBJECTIVES
Understand natural vs government-created
monopolies
Learn how monopolies harm consumers
Explore good and bad government responses

13. Competition: Why It Matters

Firms must improve or lose customers
COMPETITION:
WHY IT
MATTERS
Without rivals, firms overcharge
Competition pushes innovation
Smartphone features advance due to rivalry

14. What Is a Monopoly?

One seller with no close
substitutes
WHAT IS A
MONOPOLY?
Can raise price and restrict
output
Some buyers are shut out
Less production than efficient
level

15. Sources of Monopoly – Natural

SOURCES OF
MONOPOLY –
NATURAL
Economies of scale
lower per-unit cost
Small rivals cannot
compete
Example: electricity
grids
Government often
regulates these

16. Sources of Monopoly – Oligopoly

SOURCES OF
MONOPOLY –
OLIGOPOLY
A few large firms
dominate
They may coordinate
prices
Common after
privatization in some
countries
Less competition means
higher prices

17. Sources of Monopoly – Government-Created

SOURCES OF MONOPOLY
– GOVERNMENTCREATED
Licenses and
permits restrict entry
Tariffs and quotas
block rivals
Exclusive rights
create monopoly
Regulation can protect
incumbents

18. Monopoly Troubles

MONOPOLY TROUBLES
Higher prices
and fewer choices
Weak pressure to
innovate
Firms profit
without
improving
quality
Consumers
accept lower
standards

19. Why One App Store Is a Problem

No competition means high fees
WHY ONE
APP STORE IS
A PROBLEM
Apps blocked or slowed
Consumers get fewer options
Competition protects consumers

20. Promoting Competition: Do No Harm

PROMOTING
COMPETITION:
DO NO HARM
Avoid
Avoid creating monopolies
Remove
Remove unnecessary licenses
Allow
Allow new firms to enter
Ride
Ride-hailing apps breaks taxi monopolies

21. Government vs Monopoly Tactics

Antitrust laws stop collusion
Volvo, Daimler, and Iveco
Review mergers for dominance
GOVERNMENT
VS MONOPOLY
TACTICS
Meta bought Instagram in 2012 and
WhatsApp in 2014.
Break up abusive monopolies
The US government broke up AT&T
Do not punish firms for being
efficient
Amazon offers lower prices and fast

22. Mixed Track Record

MIXED TRACK RECORD
Some interventions stop
cartels
Others protect big firms
Red tape hurts startups most
Lobbying can distort
regulation

23. Summary

Competition keeps firms efficient
Monopolies raise prices and reduce innovation
SUMMARY
They arise from scale or policy barriers
Government must target real abuses
Open competition supports healthy markets

24. Any questions?

ANY QUESTIONS?
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS

25. Thanks

THANKS
DR. TURAKULOV VALIJON | INTRODUCTION TO ECONOMICS