government funding have proven once again to be detrimental to consumers. In the discussion
of equity versus efficiency, monopolies have an advantage in which they are able to set their
marginal price beyond their marginal revenue, which in turn exceeds marginal cost. This is a
distinct advantage compared to markets which contain perfect competition. This dilemma
causes grief in the customer markets, due to the lack of options the demand is rarely affected
by price changes since there are no close substitutes to turn to. The article outlines the current
customer response to the highly monopolized government-run business, the US postal service.
In Cocktail Party Economics, a monopolies existence is hinged on the three following
government interventions, by creating laws that encourage competitive markets, regulating the
monopoly and owning the monopoly. (Cocktail Party Economics, 131) The article outlined puts
into focus the third method of government influence on a monopoly, owning it. Although there
is nothing fundamentally wrong with a government owned business, especially a utility such as
mail, the article shines light on the abuse the company uses to take advantage of consumers
and push away small-business ventures. For example, the government has drastically given the
US postal service subsidies and advantages, such as mailboxes to be used by only their business.
This increases the steep curve for any other possible competitor to possibly join in on the
market, which demonstrates the monopoly that they control.
Secondly, due in part to the direct government interference with the market, the topic
of equity can also be brought into question...
... middle of paper ...
...e price of product
to cause an inefficiency, but also directly manipulating the supply. “The major sin – from
society’s perspective – committed by the monopolist is not that it overcharges for its products,
but that it under produces in order to maximize its profits.” (Cocktail Party Economics, 120). This
again relates to allocative efficiency, since resources are not being used to their fullest ability.
In conclusion, government intervention, or a monopolistic approach to business almost
always causes a market failure due to a deadweight loss and inefficiency, while disregarding
equity. This could easily be seen in a real-life example, outlined by the operations conducted by
the US postal service. By charging unrealistic amounts for their services, while abusing their
subsidies they have run their business to maximize profits while disregarding efficiency and
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