Question

Make the case that government regulations related to monopolies are unnecessary. As part of your argument, address how monopolies promote innovation.

Answer 1

Monopolies are profit maximsers, hence, they charge a higher price than competitive firm and a lower quantity. This leads to a deadweight loss, for which most people propound that monopolies be regulated. However, one needs to see that most of the monopolies have been able to achieve this market power because they have been experimenting, innovating and bringing a better and different product to the market. The world needs greener technologies, and monopolies are firms that come up with such innovative ideas. Hence, instead of regulating monopolies, providing them with temporary monopoly rights, patents, copyrights etc. are necessary to give people incentives to come up with newer, better ideas. After all, if people who came up with new ideas see those new ideas copied without cost by competitors, why will they bother to spend their time and energy.