Monopolistic Competition Essay

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Deadweight loss, or as termed in the question, ‘welfare loss’, is the loss of consumer and producer surplus as a result of inefficient market activity, including monopolistic competition. According to the Theory of the Firm, monopoly power includes a much higher barrier of entry, which further impedes competition by increasing the start-up cost, which essentially creates high product prices, compared to the firms, which hold the monopoly power of production, and have already established production. As a result there a loss of productive and allocate efficiency, thus encouraging welfare loss, by decreasing consumer surplus due to limited competition and subsequent monopoly powers, which enable profit-maximization at a small production output,

To combat this, reducing welfare loss by increasing output and lowering prices, government intervention may prove an efficient method of solving the problem of monopoly. By legislating anti-monopolistic policies, for example lowering barriers of entry to encourage competition that was previously unsuccessful due to the monopoly-induced high barriers of entry. This would profit companies looking to enter the market. On the other hand, if the government wishes to intervene on behalf of the consumer, several measures could be taken, including price regulations and fair price campaigns. By forcefully decreasing the profit-per-good for the monopoly, the government would effectively force the monopolies to increase the supply for them to maintain the same profit, as before. Further, I would also be possible, that the government initiated some sort of privatization campaign, with which the government could liberalize the market by offer subsidies to firms looking to enter monopolistic markets, which would work both to the advantage of grassroots, but also to the consumer whom will experience a price-fall due to a increased supply. Tax breaks, and reductions to legal barriers of entry, could also encourage further market growth, increasing the allocate efficiency of the industry, where the

It is a liberal economy, opposed to a centrally controlled economy, which is regulated by the government. On the contrary, equitable distribution of income is a more socialist approach to the economics, which emphasizes the equal wealth of all citizens and a balance of income, to benefit especially the lower parts of society, by transferring money to the state, which then distributes the wealth accordingly.

In a market system, with minimal state intervention and a large private sector, the distribution of funds to all parts of society is limited. Often, in liberal economies, factors of production are not in the hands of the state, but rather of private ownership. This creates an obvious social heritage, since the government have no control over who utilizes the resources, but the power stands in the hands of private individuals, whom do not have the best intentions on behalf of the state and act out of self-interest. This creates a cycle, where private ownership slowly divides society into two groups; one that is the land and business owners, the other the