Monopoly Can a Monopolist Set Term Paper

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One immediate ramification could be that the government intervenes in the market to limit Microsoft's monopolistic power. This has occurred frequently and Microsoft is constantly engaged in court proceedings to verify that it is not abusing its market position.

Another limiting factor would be that if Microsoft charged too much for its products then this would open the door for another company to enter the market or gain market share. For example, if Microsoft's OS's became too expensive then this would open a greater door for smaller competitors such as Linux. For most consumers, Microsoft's price does not exceed their switching costs for moving to a different platform. However, if Microsoft increases its prices substantially then this situation could be different.

The situation that Microsoft is in regarding its market structure is common for companies that are monopolistic.

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These companies can often charge a significant price premium for their goods and services. However, if a monopoly pushes the premium too far, then they are subject to some form of intervention and a changing market landscape. There may be examples that would violate this trend. For example, a pharmaceutical manufacture could have a strong monopolistic position with a lifesaving drug for a period of time. However, even then setting prices too high would led to other firms trying to break down the barriers of entry. Therefore although monopolies have a significant amount of control over their prices they must still keep their prices somewhat balanced with other external factors......

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