📚 Learning Guide
Market Failures and Government Role
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How does government intervention typically address the issue of monopoly power in a market?

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Learning Path
Learning Path

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Choose the Best Answer

A

By deregulating the market completely

B

By breaking up the monopoly or regulating its prices

C

By encouraging more monopolies to form

D

By allowing monopolies to operate without any restrictions

Understanding the Answer

Let's break down why this is correct

Answer

Government intervention addresses monopoly power by implementing regulations to promote competition and protect consumers. When one company controls a market, it can set high prices and limit choices for customers, which is unfair. To prevent this, governments may create laws that stop monopolistic practices, such as price-fixing or unfair mergers. For example, if a large company tries to buy a smaller competitor to eliminate competition, the government might block the merger to keep the market open for other businesses. This way, consumers benefit from more choices and fairer prices, helping to create a healthier economy.

Detailed Explanation

Governments can break up monopolies or control their prices. Other options are incorrect because Some might think that removing all rules helps the market; People might believe that more monopolies are good for business.

Key Concepts

monopoly power
government intervention
Topic

Market Failures and Government Role

Difficulty

medium level question

Cognitive Level

understand

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