• The recently introduced Digital Markets Act 2022 attempts to loosen Big Tech firms’ market power and to curb monopolistic business models. Monopolies including Big Tech companies now have strict rules to abide by. Among them: “thou shalt not bundle products”, and “thou shalt permit interoperability between different systems”. Penalties for transgressions include a fine of up to 20 % of a company’s global turnover, or a break-up of businesses for recidivists.

  1. Using examples, discuss the advantages and disadvantages of monopolies and other big firms that have market power. In addition, discuss some of the welfare implications of monopolies.
  2. With the aid of diagrams, explain the shapes of the long-run and short-run average cost curves for firms operating in a perfectly competitive market.