OnRamps Economics College Practice Exam

The issue this question tests is how policymakers counter monopoly power to improve welfare. The standard ways are to increase competition or regulate the market. Breaking up a monopoly directly reduces market power by turning one strong firm into several, more competitive firms. Making it easier for new rivals to enter the market changes the competitive dynamics, preventing a single firm from keeping prices high. Regulating the market imposes rules on price or output to curb the monopolist’s ability to charge excessive prices, aiming to imitate competitive outcomes even when true competition isn’t present. Nationalizing the industry—putting it under government ownership—is not typically listed as a standard remedy in this context. While government ownership could eliminate private monopoly power, it replaces private control with a public monopoly and can bring different inefficiencies and political incentives. In basic discussions of remedies to monopoly, it isn’t treated as one of the usual policy options, which is why it’s not considered the correct choice here.