Mba 540 Worksheeet Scenario

Microsoft became a monopoly because they were able to create and enforce universal data interaction standards for personal computers. Microsoft did this by creating a series of operating systems (DOS, then Windows), and by defining the kind of machine that could run their OSs. Microsoft was successful at this because, unlike Apple and Mac it set about creating nonexclusive standards that allowed anyone to get into the computer hardware business, and fill every market niche. So, Microsoft products were able to be in every market niche. The strategy that made Microsoft a monopoly worked because a communication/data system is valuable only in terms of the number potential users and the number of possible interactions. Microsoft became a monopoly because they created the most universally useful standard for desktop computers. And, the most universally useful standard is the one most valuable to computer users. The problem is that in an unregulated market, the Microsoft no longer has an economic reason to produce a quality product because of it’s monopoly.However, economists maintain that a monopoly does not exist simply because there is only one provider of a good or service. For example, in the Microsoft case, the Windows operating system is enormously popular, but the potential for a competing firm to provide a similar product exists. In fact, Macintosh is a small but important competitor in the computer and operating system market. Linux has also emerged in recent months as a viable alternative to Microsoft Windows.

But is Microsoft's market share (about 90%) so massive that it can behave like a monopoly? A monopoly can set prices artificially high because it has no serious competitors to force it to do otherwise. It can also arbitrarily limit the supply of the good or service it provides to create scarcity and drive prices up. In either case, the monopoly collects a "rent" on its domination of a particular sector of the economy. This rent represents income...