Question

a. The City of Houston has contracted with towing companies and given each company the sole right to do all the towing on a pre-assigned section of highway. The purpose of the arrangement is to make sure the broken-down vehicles are removed quickly so that the highway does not become congested because of an accident. The companies without competition can charge substantially higher prices. There has been an outcry about prices. Has the city created geographic monopolies? If so why not allow competition?

b. Hamermesh discusses examples of a monopoly given by students as: Luxfer air tanks for scuba diving, the Paul Ecke Ranch for the propagation of poinsettias, and Topps sports cards. Dr. Hamermesh explains that the Topps Sports cards are the trading cards of sports players (baseball) that come with bubble gum. He suggested that purchasers bought the bubble gum cards threw the bubble gum away and kept the cards. Today the argument, until recently legislation, is that the use of players images on programs, soda cups by college sports teams was a monopoly. Is the use of players images by a sports team only, a monopoly? Explain.

Answer 1

As per the answering criteria, I am answeing the first question.

a. Yes, the city has created geograohic monopolies. Geaographic monopolies are those monopolies which govern a geographical region either assigned to or dealt by them because of the geographical adveristies of the region. In the present case, the companies are given specific areas to cover so that effeciency is not compromise and the probabilty of a vehicle lying on the highway after an accident is reduced. Regarding the outcry about the prices, the governement can enter the market and put some regualtions regarding the prices such as price controls. The market should has not allowed competition because monopoly in this case is is leading to effeciency in each area alloted. Due to large size of highways, the companies may not be able to fully handle the whole project and hence, certain areas are alloted to them.