Essay Sample on Monopolies: Higher Prices and Lower Outputs

Monopolies are created when a single seller becomes the only trader of a unique product in a market. Such traders have power over the market and can change or set prices without the consideration of the purchasing abilities of their prospected buyers. They do so because there are no competing businesses that would give them a reason to standardize prices. Unlike in competitive markets, monopolies charge higher and produce less output. Monopolistic markets reduce efficiency because they charge higher than the marginal cost, and thus there is no efficiency on the side of buyers. When monopolies are cleared, markets become competitive, and products become affordable, and associated costs also reduce. Therefore, doing away with monopolies is such a great deal to not only the expected buyers but also to the society at large. Competitive markets increase innovation, enhanced quality of products, increase output, and the end, result in greater customer satisfaction, which is hard to find in monopolies. The Sherman Act and the Clayton Act are, therefore, effective laws in the United States that have helped reduce inefficiencies caused by monopolies.

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The Sharman Act sought to prevent the creation of monopolies in not only in private businesses but also for the states. The Act outlawed all combinations that restrained trade between states or between states and foreign nations. The provision established that while states are under the federal government, they would be allowed to engage in business deals that would help them establish themselves and gain from business deals without coercion by the federal government. The idea of the states being controlled by the federal government and being ruled on what business to engage was rubbed away by the ACT. The law, therefore, corrected the inefficiency of the federal government having supreme authority over trade in the states, which would have been a probable creation of a monopoly.

On the same note, the Sharman Act made it illegal to monopolize any part of trade or commerce across the nation. Any organization that was found trying to monopolize any trade would be prosecuted and could be deregistered, dissolved, and even fined. The Act, in its onset, came at a time when there were scores of industrial monopolies. It thus created a chance for other organizations to be established, and later they became equal competitors to the previously recognized monopolies. Any attempts to create monopolies were hindered, which is the reason that any trade in the nation has fierce competition even today, reducing the inefficiencies that would have been created by the monopolies if they still existed.

Besides, the Clayton Act was developed later to galvanize the Sharman Act and restrict private engagements that would create a suitable environment for the development of monopolies. The Act not only declared it illegal to make monopolies but also outlawed any business practices that would see their creation. Practices such as discrimination in licensing, shipping, and distribution were declared illegal as they would give undue advantage to some business to thrive over the rest. Also, the Act restricted the merging of companies that would lessen competition. The Act, therefore, corrected the inefficiencies of monopolies by preventing them from having an advantageous environment to thrive.

The inefficiencies of monopolies are visible in the manner that they disadvantage buyers, charge higher, and reduce the general output of products in the considered market. It was due to these inefficiencies that the Sharman Act and the Clayton Act were developed. The two laws prevent the creation of monopolies from the state level to private businesses. It would be, therefore, necessary to conclude that they are effective in preventing the creation of monopolies, and they establish conditions necessary for creating perfect competition.