Monopolistic Competition: Influence of Monopolies on the Economy Essay

Submitted By styler1914
Words: 340
Pages: 2

One mesoeconomic concept that was presented in the book was monopolistic competition. I chose this concept because it explains how businesses attempt to form possible monopolies and the potential influence it can have on the economy. "In September 1996, Office Depot and Staples, the two largest office superstores in the United States, announced an agreement to merge. Seven months after the merger was proposed, the FTC voted to oppose the merger onthe grounds that it would harm competition and lead to higher prices in the office superstore market. The FTC argued that the relevant market was the market for office supplies. The FTC made this distinction because the superstores carry a broad range of office supplies and maintain a huge inventory that let's consumers do one-stop shopping at these stores." (Farnham, 211) Simply put the Federal Trade Commission disapproved of this because they felt it would destroy small businesses (many that were already exterminated thanks to Home & Office Depot), and make Office Max, the only real competitor left obsolete. The rationale of the FTC was that both companies were inherently competitors and that a merger between the two would only lead to higher prices seeing how there would be no company to contest the proposed merger. The next concept is that of First-Degree Price Discrimination and consumer surplus. Consumers surplus is the concept that consumers typically do not have to spend the maximum amount they are willing to pay for a…