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Answer this question:

One problem with monopolies is that they raise prices above marginal cost. This shuts consumers out of the market and creates deadweight loss. Government regulation is one way that we can alleviate this market failure. However, the courts generally base their decision to apply these antitrust laws when consumers are harmed. But sometimes consumers can be helped by market power. Amazon has a tremendous amount of market power. But consumers usually benefit from low prices and good service. Critics say that Amazon abuses its market power in multiple ways, including:

  • Forcing suppliers to charge lower prices.
  • Reducing pay and providing poor working conditions.
  • Using their market power to expand into other markets.

Should we be concerned with this kind of market power? Or should we only be concerned when market power hurts consumers? Explain your answer.

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