"15"

 How did your understanding of monopolies change after reading this chapter? What do you see differently now? As you read more into anything details emerge you had been unaware of. Most of us know the American Revolutionary War lasted eight years between 1775-1783. If you take the time to read more about the Battle of Yorktown for example you would learn that the war was not confined to New England states. This chapter introduced specific details of monopolies I was unaware of; types of monopolies, profit, pricing, pricing discrimination and public policy. Some of the details interesting others overwhelming yet others practical or at least made sense.

Give an example of a regulated monopoly (a monopoly that exists due to government fiat).  Why did we choose to give this particular firm monopoly status?  Do you think it was a good decision?  Why or why not? Would you expect prices to rise or fall if we allowed other firms to enter the market? Why?  While rooting around for information on regulated monopoly the term government fiat confused me. Initially I interpreted fiat as government owned monopoly, as government money being used to control the monopoly, that made no sense at all. After discovering that this was referring to regulation and had not real value things became more clear. 

Utility companies I believe prove the best example specifically water. The vision of multiple utility companies in a market digging up streets to put in their infrastructure for distribution makes this clear and as a new firm enters the market it also had to lay in infrastructure, clearly ridiculous. 

As I have become to understand economics having multiple firms maintaining a competitive market to balance prices this should make sense, but it does not. So there is one set of pipes and to keep that utility from charging unrealistic prices the government regulates maybe even subsidizes the commodity to keep prices fair for everyone. If another utility company entered the market the cost of infrastructure would out weigh what they would gain from entering the market against an existing utility. I suspect the firm entering the market would have to charge higher prices to make up for the cost of infrastructure before being competitive with the existing firm. Maybe they could work out a deal to pay for the use of existing infrastructure for the distribution of their product but that is ridiculous.
It does not seem possible to be competitive in this scenario. The power grid I believe is tapped this way because of alternative power developing methods that customers may prefer; solar, wind or hydro not sure how that is accomplished though.