ECONOMICS 2 Essay Example | Topics and Well Written Essays - 500 words

ECONOMICS 2 - Essay Example An example of an oligopoly is the airline industry. The airline industry is regulated by several agencies. There regulations that protect consumers against noise pollution. The prices of the fuel that the airlines utilized are regulated. The type of goods that a person can carry into an airplane is regulated. Aircrafts must comply with safety regulations. Oligopolies are market structure in which there are limited numbers of participants, while monopolies have only one player. The reason regulations are so important in these two market structures is because the general public must be protected from collusion and unfair practices from these firms. In monopolies regulations become more critical due to the power that the monopolist holds. Without regulation a monopolist could abuse his power and charge super high prices since competition is non-exist. Industrial regulations protect the customers, but its implementation raises costs. Companies at times have to invest money in new equipme nt to comply with regulations. Regulations that increase labor costs affect the profitability of companies. These costs are passed on the customer in the final price of the service or product. Regulations affect the cost structure of firm in an adverse way.