Tuesday, September 16, 2014

Monopolies and Cartel

Monopolies and Cartel: Class Discussion Response #3

There are two types of monopolies:

1. Horizontal Monopoly- One company owns every business in one stage in a production process. 
Example- (Movie production process) One company owns every distributing business (such as Amazon).
This type of monopoly has NO competition in it's area of a production process.
It is threatening in which can change whatever it wants to change and can rid of freedom of expression because it has total control.
*THIS TYPE OF MONOPOLY IS ILLEGAL*

2. Vertical Monopoly- One company owns one of every stage in a production process.
Example- (Movie production process) One company owns one business that makes the movie, one business that processes the movies, one business that distributes the movies, and one business that gives the people/public access to the movies. 
This monopoly can still have competition with other companies and businesses.
*THIS TYPE OF MONOPOLY IS LEGAL*

Cartel- When companies work together to raise prices above the market price to make/force everyone to pay the same, above-market, high price.
Example- All the gas stations in a city decide to all raise their gas prices to $3.99 to get more money even though the market price is only $3.55, and in every other city the price is below or the same value as the market price.
*THIS IS ILLEGAL*

I'm going to be honest; before we had this discussion I wasn't entirely sure I knew what a monopoly was, and I definitely wasn't aware that there were different types of monopolies. In fact, the only place I'd really heard about a monopoly was from the board game "Monopoly". I also didn't know what cartel was. But now that I do know, I definitely can see the connection. Just like in the board game, when someone has total control with a monopoly it can be a disaster for everyone else (in the board game, harmful to the other players: in real life, harmful to other companies) and can lead to total obliteration (in the board game, obliterating by losing the game: in real life, obliterating by harming the economy or causing other businesses to go bankrupt). 
In my opinion, although monopolies can help a certain company make more money, I think they are ultimately harmful and can hurt our economy more than help.

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