Question

Should governments prevent formation of monopolies

Answer 1

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The government may wish to regulate monopolies to protect the interests of consumers. For example, monopolies have the market power to set prices higher than in competitive markets. The government can regulate monopolies through price capping, yardstick competition and preventing the growth of monopoly power
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Answer 2

The AC curve is commonly higher than it should be in a monopoly firm due to the absence of competition, decreasing incentives to cut production costs. Be this as it may,governments tend to toleratemonopolies rather than preventingthem. ... Governments therefore tend to impose regulations onmonopolies...

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