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The Domestic Long Distance Market & Competition

While it is true that monopolies can exercise a considerable amount of market power, it is also true that there are few true monopolies in the American economy; the threat of additional competition makes it difficult to sustain a monopoly for a long period of time. However, one of the most notorious monopolies, in part because it was sanctioned by the government, was that of American Telephone and Telegraph (now AT&T). This research examines the nature of competition and considers the current state of the domestic long distance market.

A complete monopoly exists when there is a single producer with a unique product which has no close substitutes (Samuelson, 1976, p. 491). This gives the seller considerable influence over the price that can be charged for the good or service. The monopoly most likely engages in institutional public relations advertising since it is not necessary to advertise the product or service itself. Another key feature of monopolistic competition is that there must be significant barriers to entry; perhaps large capital investment would be required for new companies to enter the market. Without these barriers, the monopoly would face considerable competition from other companies seeking to take advantage of the demand in the market.

Utilities are a current situation of a monopoly and also a situation where market power has been exercised. Because of the unique nature of the product (key to survival in today's age), and because of the large capital investment that is required to enter the utility industry, most utilities are regulated by government, either on a local or regional basis. This is presumably in the best interest of the consumer since without price regulation, the industry could conceivably charge any price it wanted. Until suit was brought against it in the 1970s and it was dissolved in the 1980s, AT&T was treated largely as a utility delivering a basic need, telephone service, to cons...

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The Domestic Long Distance Market & Competition. (1969, December 31). In LotsofEssays.com. Retrieved 08:11, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1694563.html