Title: Why Monopolies Often Earn Zero Economic Profit - Supply Curve
Headings: Why Monopolies Often Earn Zero Economic Profit
Why Monopolies Often Earn Zero Economic Profit
Content: Economists call such actions rent-seeking activity. Any costly action a firm undertakes to establish or maintain its monopoly status is called rent-seeking activity. In countries with corrupt bureaucracies, rent-seeking activity includes bribes to government officials; in less corrupt governments, it includes the time and money spent lobbying legislators and the public for favorable policies. For example, in 1999, AT&T acquired several cable companies, giving the firm a monopoly on cable television and cable Internet service in millions of homes across the United States. Except for one problem: City governments—before they would approve AT&T as the new operator of their cities' cable service—were demanding that AT&T permit competing Internet service providers, such as AOL and Bell Atlantic, to use their new cable lines. This, of course, would have cut into AT&T's monopoly profits in these cities. As we would predict, AT&T launched a war against these "open access" policies. It spent millions of dollars on lawyers, lobbyists, and public relations firms.