A Comparison of Two Monopolists in a Competitive Market

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A Comparison of Two Monopolists in a Competitive Market

According to Webster , to have a monopoly is to have exclusive

ownership, possession, or control. The following essay is an

examination of Microsoft in comparison to this definition and another

commonly known monopoly, Standard Oil. Also attention will be given to

the necessary role of and problems with monopolies.

Competitive Market vs. Monopoly

A competitive market consists of many buyers and sellers. Markets

thrive because an equilibrium price is established through natural

competition and no single buyer or seller can affect that price.

Instead both buyer and seller must take the price given by the market

based on the dynamics of supply and demand. This competition is

healthy and necessary to the economy because it regulates price,

production, promotes and motivates innovation and improvement. In

comparison, a monopoly dictates its price and quantity based on

demand. It has the potential to influence prices and does so to

increase profits. Regarding production, a monopolist produces below

the demand curve in order to charge higher prices to consumers. Less

production and higher prices clearly illustrate the inefficiency of a

monopoly and the harm it may cause to the economy.

The Sherman Anti-Trust Act of 1890

In order to prevent a handful of monopolies and trusts (another form

of monopolization) from controlling the economy, Congress passed the

Sherman Anti-Trust Act of 1890. Signed into law by President Benjamin

Harrison on July 2, 1890, the law consists of two sections.

Section 1 primarily prohibits any contract or action whose aim is an

unreasonable restrain on tra...

... middle of paper ...

... in favour of Microsoft and many believe that government

intervention will cause more harm to the industry than good.

Conclusion

The government both benefits from and allows natural monopolies to

exist, in part to encourage research and development. Some analysts

claim that if the government wins technological growth and innovation

will decrease drastically. Others believe that Microsoft has become to

powerful, resembling its 100-year predecessor Standard Oil by stifling

competition and costing the consumer a great deal through its

production practices and pricing. Is Microsoft guilty of violating The

Sherman-Anti Trust Act of 1890, or are Microsoft's competitors lacking

quality products and innovation? Whatever the court's ruling, due to

the enormous market share held by Microsoft, the outcome will be felt

by all.

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