In ECONOMIC REVIEW Vol. 37, No. 4, I outlined how you might approach examination questions about the reasons for the existence of monopolies as well as the potential benefits and drawbacks of industries dominated by one or a small number of firms. As a continuation of this theme, this Question and Answer explores and evaluates ways in which governments could control the actions of dominant firms so that they are encouraged to behave in society’s best interests.
Discuss whether regulation is the best policy to ensure that monopolies operate in the public’s best interests. (25 marks)
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