Question

Most cities are served by only one cable company. How might this monopoly power affect prices and service? What should the government do, if anything?

Chapter 10 Question

Why might inflation accelerate as the unemployment rate declines?

Chapter 11 Question

From March 2009 to 2013, the U.S. stock market more than doubled in value. How might this have affected aggregate demand? What happens to aggregate demand when the (you must give either a professional or personal example)

Answer 1

9. Monopolies enjoy significant market power because of which they can control the market price and the product quality. Therefore, monopolies can arbitrarily increase the price without losing significant number consumers. Also, in the absence of any competition, monopolies do not have compelling reasons to improve quality. Market competition results in a higher quality of products, which is absent in the case of a monopoly.

The government can intervene to reduce the unchecked market power of monopolies and prevent exploitation of consumers by the monopoles. The government can also promote competition by lowering entry barriers.