A look at the concept of dead-weight loss and an examination of monopolies.
This paper explains the several different ways to understand the concept of dead-weight loss as one of the prices of monopolistic policy. The paper also examines the way in which one may calculate its empirical values. The paper defines what a monopoly is, provides explanations of power and dead-weight losses and provides examples to explain theory.
“We should perhaps begin with a definition of monopoly, which is simply the sole power or privilege of dealing in anything. In business, a company that has the sole power of dealing in a commodity may raise prices as high as it would like because of the absence of competition. To prevent such monopolies and to encourage competition within each industry, the U.S. government has a number of antitrust laws that it can use to increase competition within an industry. Antitrust laws to prevent the outright emergence of private monopolies in major industries by using law and the courts to impose competitive conditions on firms in these industries.”