Question

Suppose that a computer software company controls the operating system market. Although the government knows that the price is higher than it would be in the presence of competition, it believes that such profits are crucial to incentivizing innovation in the high-tech industry, a policy goal of the government.Which of the following policy options might most effectively enable the government to achieve its objectives in this situation?a. Do nothing at all.b. Regulate the pricing behavior.c. Turn the company into a public enterprise.d.Use the law to increase competition.

Answer 1

Answer:

a. Do nothing at all.

Explanation:

Since, the government knows that the price is higher than it would be in the presence of competition, it believes that such profits are crucial to incentivizing innovation in the high-tech industry, a policy goal of the government shall be to leave it alone.

The government has four potential policy paths to pursue when faced with a monopoly or powerful oligopoly