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Test No.

Name__ Ciobanu Anastasia____ Group T 132____

Please answer the presented questions, presenting arguments and explaining the choices made. The full answers
should not exceed 5 pages, keeping the same font, spacing and page layout present in the current document. You
have to choose ONE of the below questions and answer it.
The deadline for the submission of the answers is 26 October, 2014, 23:59. All answers submitted late will not be
considered without an email explaining the reason for the late delivery. All answers should be emailed to the
following email address: zgardan@gmail.com.
Questions:
1) What is the relationship between law and business? Do they need each other? Identify the problems
existing in law regulating business and propose solutions for them.

2) What business obligation is most probable to consume the most time and efforts for small businesses?
Give arguments for your choice.

3) Do you think monopolies are good for the economy? Give arguments for your choice. What is the
position of the law in monopolies? Can a company have the objective to become a monopoly?

4) What are the differences between registration and licensing? Find as many differences as possible.

Do you think monopolies are good for the economy? Give arguments for your choice. What is the position of
the law in monopolies? Can a company have the objective to become a monopoly?

Answer:

According to dictionaries, the term monopoly means "exclusive control of a commodity or service in
a given market."
I think that monopolies can influence good and bad, the economy. A monopoly could be bad for the
economy and it can allow one business to set the prices for a certain product or service virtually
eliminating free trade. If one business is the only provider of a product or service, the consumer is
forced to pay whatever price they demand. This can also lead to the company providing a low quality
product or service without fear of losing business. Since monopolies are the only provider, they can set
pretty much any price they choose. This is known as price-fixing. This is especially true for goods and
services where there is inelastic demand, where people don't have a lot of flexibility.
Monopolies are also bad for an economy because the manufacturer has no incentive to innovate,
and provide "new and improved" products. This used to be true of cable companies. It was expensive
to lay new cable, so residents had to accept the cable company's service and prices.
They can create inflation. Since they can set any price they want, they will raise costs to consumers.
This is known as cost-push inflation. A good example of how this works is OPEC, or the Organization of
Petroleum Exporting Countries. The twelve oil exporting countries in OPEC now control the price of
46% of the oil produced in the world.
First of all, monopolies are bad because there is NO competition. Competition drives the price of goods
down. Monopolies can set and raise the price at will.

Are Monopolies Ever Good?


Sometimes a monopoly is necessary to ensure consistent delivery of a product or service that has a
very high up-front cost. This is true, for example, with electric and water utilities. Since it is so expensive
to build new electric plants or dams, it made economic sense to allow a monopoly for a particular area.
To protect the consumer, these industries were regulated by the federal and local government. The
companies were allowed to set prices to recoup their costs and a reasonable profit. In the 1990s, there
was much talk of deregulation to allow competition, and in some cases this in fact occurred.
For example, in Republic of Moldova we have two some monopoly companies that offer electricity, tape
water and gas, named asApa-Canal,Moldova-Gaz and Union Fenosa. These companies can set their
own price of their services. Of course, as in all imperfectly competitive settings, natural monopolies have
some bad sides. They still have the incentive to reduce their sales and charge at a higher price than in a
competitive market, leading to losses to society and profits for them.

Why Government tolerates monopolies


-It is difficult to break up monopolies.
-Governments can implement regulation of Monopolies
-Monopolies can be more efficient because of the advantages from economies of scale. This is
particularly important for firms operating in a natural monopoly. For example, it wouldnt make
sense to have many small companies providing tap water. The large scale infrastructure makes it
more efficient to just have 1 firm
-Firms with monopoly power are not necessarily bad. Google has monopoly power on search engines
but we cant say Google is an inefficient firm that doesnt seek to innovate.
The reason that governments tolerate monopolies is because they are also one of monopolists. They
have ultimate monopolistic control and the legitimate use of power and force. Whether its criminal
justice, police, military or mail almost all government agencies function as a monopoly.

What is the position of the law in monopolies?

Law has its own influence over the monopolies. Monopolies in the U.S. aren't actually illegal.
However, they cannot use their monopoly power to gain price or other advantages thanks to the
Sherman Anti-Trust Act. It was called Anti-Trust because that was the form that monopolies held in 1890,
when it was enacted. A group of companies formed a trust to fix prices low enough to drive competitors
out of business. Once they had a monopoly on the market, these trusts would raise prices to regain their
profit.
The most famous trust was Standard Oil Company. John D. Rockefeller owned all the oil refineries,
which were in Ohio, in the 1890s. His monopoly allowed him to control the price of oil, and to bully the
railroad companies to charge him a lower price for transportation.
Competition law is law that promotes or seeks to maintain market competition by regulating anticompetitive conduct by companies. Competition law is implemented through Public and Private
Enforcement.
Competition law is known as antitrust law in the United States and anti-monopoly law
in China and Russia.

Principles:
Competition law, or antitrust law, has three main elements:
Prohibiting agreements or practices that restrict free trading and competition between businesses.
Banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead
to such a dominant position. Practices controlled in this way may include predatory pricing, price
gouging, refusal to deal, and many others.

Supervising the mergers and acquisitions of large corporations, including some joint ventures.
Transactions that are considered to threaten the competitive process can be prohibited altogether, or
approved subject to "remedies" such as an obligation to divest part of the merged business or to offer
licenses or access to facilities to enable other businesses to continue competing.
The first law in Moldova that governed the issues of monopolistic and anti-competitive behavior was the Law no.
906-XII of 29 January 1992 "On the limitation of monopoly behavior and the development of competition". It first
introduced the definition of a dominant position in the market, provided for some rules designed to prevent the
abuses of dominant position, etc. Though not formally annulled this law does not play any significant role in the
market regulation any more since the Law on the Protection of Competition no. 1103-XIV of 30 June 2000 came
into force in the end of 2000.

The Law stipulates certain types of anti-competitive activities:


1. Monopolistic activity:
- Abuse of the dominant position in the market;
- Anti-competitive agreements.
2. Unfair competition.
3. Public authorities' activities limiting competition.

Can a company have the objective to become a monopoly?

Of course company would like to become a monopoly, but nowadays there are many barriers to become
it.
Barriers to entry may exist for three reasons:
1. Economies of scale,
2. Actions by firms, and/or
3. Actions by the government.
Also, firms can have an objective to become a monopoly company because, they will benefit from
monopoly power, which will include:
1. They can charge higher prices and make more profit than in a competitive market.
2. The can benefit from diseconomies of scale
3. They can use their monopoly profits to invest in research and development and also have resources for if
the firm does badly.