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    Sami Siddiqui
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    Creating government monopolies is not necessarily bad public policy. A government monopoly, where the government prohibits competition by law and is the sole provider of a good or service, can be an example of a government created monopoly. While monopolies reduce competition, government monopolies in areas like utilities may be created to ensure universal access to important services at reasonable prices. However, lack of competition can also reduce incentives for innovation and efficiency. So the merits of each individual government monopoly would need to be assessed based on balancing consumer interests and policy goals.

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    Creating government monopolies is not necessarily bad public policy. A government monopoly, where the government prohibits competition by law and is the sole provider of a good or service, can be an example of a government created monopoly. While monopolies reduce competition, government monopolies in areas like utilities may be created to ensure universal access to important services at reasonable prices. However, lack of competition can also reduce incentives for innovation and efficiency. So the merits of each individual government monopoly would need to be assessed based on balancing consumer interests and policy goals.

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    12 views2 pages

    Micr Economics

    Uploaded by

    Sami Siddiqui
    Creating government monopolies is not necessarily bad public policy. A government monopoly, where the government prohibits competition by law and is the sole provider of a good or service, can be an example of a government created monopoly. While monopolies reduce competition, government monopolies in areas like utilities may be created to ensure universal access to important services at reasonable prices. However, lack of competition can also reduce incentives for innovation and efficiency. So the merits of each individual government monopoly would need to be assessed based on balancing consumer interests and policy goals.

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    Question# 1: Over the past 20 years, technological advances have reduced the cost of computer chips.

    How do you think this affected the market for computers? For Computer Software? For Typewriters?
    Answer: Computer market is affected in a positive manner due to technological advancement. The cost of computer software and computer hardware has reduced to a recordable limit. This is all because of technological advancement as the technology advances the demand for old technology decreases and in result the cost of the computer software and hardware reduces. Typewriter is even older technology then to computer. Computers have a variety of vigilant advantages over the typewriters. The demand for typewriters is no more in the .

    Question# 2: What is marginal product and what does it mean if it is diminishing? Answer: In economics the marginal product or marginal physical
    product of an input is the extra output that can be produced by using one more unit of the input assuming that the quantities of no other inputs to production change

    Diminishing marginal product:


    By diminishing marginal product we mean that fall in the rate of increase in output of a process as the amount of an input is increased, while the amount of other inputs is held constant. For example, it is usually possible to increase the output of a farm by adding more labor, fertilizers, or water-but only up to a certain extent. If it were otherwise, any one farm could feed the entire world.

    Question# 3: Under what conditions will a firm exit a market? Explain. Answer: In short run when a firm is not able to recover its fixed
    cost it will choose to shut down temporarily if the price of the good is less than the average variable cost. In the long run when the firm can recover both fixed and variable costs, it will choose to exit if the price is less than the average total cost.

    Question#4: Give an example of a government created monopoly. Is creating this monopoly necessarily bad public policy? Explain. Answer:
    A government monopoly is a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law. It is a monopoly created by the government. Examples of government created monopoly in Pakistan are WAPDA, SUI GAS.

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