University of Westminster

Question 3.
In economics, returns to scale refers to the changes in output of a firm or industry resulting from all factors proportional in all inputs to output.

There are three types of returns to scale: Increasing Returns to scale, Constant returns to scale, and diminishing Returns to scale.

Increasing returns to scale refers to situation where if all factors of production are increased, output increases at higher rate. Diminishing returns refers to situtation, ehere if all factors of production are increased in a certain proportion, output increases in a smaller proportion, meaning that if inputs are doubled, output will not be doubled, it will be less than doubled. Constant returns to scale refers to situtation, where if all factors of production are increased, output increses in the same proportion. It simply means that output will be doubled if factors of production are doubled.

In our case, if there are increasing returns to scale over the wide range of output, it would be expected to find relatively large companies or industries. Reason for this is that since there are benefits to high-level production, large businesses have a significant advantage over small firms. Car manufacturing compan can be taken as an example, in first year, that company employs 100 additional workers , uses 25 machines and manufactures 500 cars. In the second year, it employs 200 workers, uses 50 machines, and produces 1225 products. It shows input is doubled resulting more than doubled output. An organization has greater experience of reduced costs due to increased specialization, more effective usage of large sections of equipment (for example, use of assembly lines), volume discounts, and other advantages of large-scale manufacturing.

Question 4.

The article posted in the New Tork Times states microeconomic issue about monopoly happening lawsuit between Justice Department of USA and Google company. The U.S government sues Google with the claim that the company is an illegal monopoly. All the activity that the Department of Justice claims is evidence that Google has maintained an illegal monopoly over search advertising and search for years and this could have led to a crackdown on agencies like the Department of Justice and the U.S Federal Trade Commission. Those agencies are in charge of keeping watch on companies for any signs of potentially abusive actions. The Department of Justice accused Google of locking out competitors through tactics like paying telephone manufacturer companies and others to ensure that Google’s web search engine is installed to have a prominent position on Android smartphones and iPhones. Conversely, by emphasizing that its goods are free and that no one has to use them, Google has long defended itself against monopoly charges. Approximately 90 percent of global web searches are dominated by Google and search-based advertising dominates, but it retains a smaller share of the overall digital advertising market. Google has rejected unfair competition charges for a long time and is expected to firmly oppose any attempts to pressure it to spin off its services into separate companies. The company claims that even though its business is large enough throughout the world, they are beneficial for users. “ People use Google because they choose to -- not because they’re forced to or because they can’t find alternatives,” the company said in its tweet after the lawsuit.

Before we look at Google's proof as a monopoly, it's important to understand what a monopoly is. The word is frequently used in the media, but not necessarily in its proper sense, and many businesses accused of monopoly need not fall under the strict definition.

In essence, a monopoly is a situation in which only one business or community controls either all or all of the market for a particular product or service. The monopoly is thus a condition in which competition is absent. Instead of just a monopoly, Google is also considered a digital monopoly. What is a digital monopoly, however?

The meaning at its base is the same as above, but it refers only to the digital market place, particularly on the Internet. The definition that digital media forms exclude all other forms of media is a digital monopoly. As digital media has various problems with transparency and advanced modalities, it is more likely that a digital corporation can monitor and dominate information and entertainment.
First of all, it should be understood why Google embodies the image as a monopoly in the first place. People agree on whether or not Google’s position as a good or bad monopoly, but it is irrefutable that its position in the market is as a leader. Even though there has never been a case Google itself claimed to be a monopoly, some professionals do not consider being a monopoly is a dirty word. Some internet users argue Google is a monopoly and it is a good thing, not only for Google itself but also for its consumer.

The argument about Google’s dominance over other competitors as a market leader does not necessarily mean it is not advancing. Google’s current position allows it to pay undivided attention freely in building a stronger business and better service and product for customers.

In the highly competitive field, companies do not have an attention point on anything other than profit maximization. But Google’s position where making money is not on top of priority makes it freer to focus on the long- term future of the business. Google’s so-called monopoly became to be simply because its product and service are so much better than others in the field.

Positive aspects of a monopoly and digital monopolies can be defeated by any superior competition, yet there is nothing wrong with being a monopoly in Google’s condition. Some opponents of the company claim it is using its position in a monopolistic manner while the company might not have reached its market status via illegal actions.

According to those mentions, critics argue that Google’s position should be curbed and it should not be able to promote its services as freely as it does.

Most experts arguing against digital monopoly are not concerned about market positions per se or its influential effect on the competition, but the ownership of personal data of users. Companies like Google have a chance of collecting a vast amount of data from their users during different operations

and that database could be exploited to stay ahead of other businesses.

Data collection and ownership makes the condition confusing, as it has not been considered a competitive advantage in the monopoly regulations.

Google’s market position is unrivaled and it enjoys a clear market over its competitors. Monopolies of the digital world should be treated differently and regulators should start focusing on user data ownership instead of simply on healthy competition in the market. Although it is still important to keep monopolies under control and limited, Google is not as abusive of its power as an argument occurs.

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