Using anti-trust law to break up a monopoly

Question

Quizplus · Accepted Answer

Using anti-trust law to break up a monopoly makes sense if the market would function well under competitive conditions. Breaking up a monopoly can enhance competition, leading to lower prices, improved quality, and increased output. However, if the monopoly resulted from natural economies of scale or network externalities, then breaking up the company may not be efficient, and it may result in higher prices and reduced output. Similarly, if the monopoly relied on patents or copyrights, then breaking it up might reduce the incentives for innovation, which could ultimately harm consumers. Therefore, the decision to break up a monopoly should be based on whether it will actually ensure economic efficiency and promote consumer welfare.

Using Anti-Trust Law to Break Up a Monopoly