Econmics(_Microsoft_case quesitons ) - Essay Example

Microsoft became a monopoly because the company was able to create and mandate the use of their own universal data interaction standards to be eventually used in all personal computers. Microsoft was successful at implementing their strategy because, unlike their competitors at the time Apple and Commodore, Microsoft’s philosophy was to create an operating system that allowed any computer be it for personal use or business to operate and communicate and communicate with each other seamlessly (Fisher, 2000). 2) When a firm decides to behave monopolistically it recognizes its influence over market price.

In the case of a monopoly, instead of allowing supply and demand to determine the highest price the market will bear, monopolies choose a level of production output and pricing structure that maximizes their own profits. For a monopoly profits are maximized when marginal costs equal marginal revenue. A we can see on the graph the point where Q* and P* intersect corresponds to the point where MC=MR. If marginal revenue is less than marginal costs, its economically advantageous for the firm to choose to produce less than the maximum output since the savings in costs would more than make up for the increased marginal revenue.

If a company operates in a competitive environment instead of being a monopoly production output would be in line with the point in the graph (pl) where price equals marginal costs. Thus in general a monopolistic marketplace is characterized by having higher prices and lower production when compared with an open competitive market. As a rule a monopoly will be very inefficient since a monopolist will produce a level output less than the competitive amount and is consequently Pareto inefficient.

Monopolies are detrimental to consumer interests since they allow companies to create abnormal profit levels by obligating consumers to pay higher prices and due to a lack of any competition, product quality, innovation and variety will also be negatively affected. 3)From its inception, in order to protect is market share, Microsoft purposely created its operating systems to restrict easy integration and interoperability between PC’s using their Windows operating system and group servers not utilizing Microsoft’s server operating system.

The company utilized the practice of bundling its browser Internet Explorer to their Windows operating system without providing the user other browser options by default. The company was also guilty of tying its Windows Media Player with its Windows Operating System which currently has a around over a 90% market share in the European Union (Statcounter, 2011).The European Union investigation concluded that Microsoft was purposely and illegally withholding interface information from its competitors in order to put them at a disadvantage.

This is in clear violation of Europe’s antitrust laws. 4) The European Union was originally created in 1958 with the purpose of stopping the wars in Europe. Six countries originally joined the EU: Germany, France, Italy, Netherlands, Belgium and Luxembourg. Soon with the political and economic success of the union many of the other European nations joined the union and today it has over 27 member countries including non European nations such as US, China, and Japan. Today the