Question A21

Market dominance in computer chip manufacturing will mean

higher prices

One of the most hard fought anti-monopoly cases of 2019, The Federal Trade

Commission (FTC) v. Qualcomm, is taking place in California, USA.

It's been two years since the FTC investigated Qualcomm alleging that the

computer chip manufacturer is engaged in illegal activity that allows it to

overcharge for its patents.

In 2016, South Korea's monopoly regulator fined Qualcomm $854 million for

breaking competition laws, the largest fine ever given in South Korea.

Taiwan's Fair Trade Commission also fined Qualcomm with $778 million.

There are concerns that if a major competitor, Intel, were eliminated from the

computer chip market Qualcomm would likely regain its monopoly over the

market. As a result, Qualcomm would be able to impose monopoly pricing on

the market, leading to increased costs for consumers. Not only would

consumers pay more for their smartphones and computers, but the ban would

reduce consumer choice and likely preserve Qualcomm's monopoly over the

long term.

Source: Insidesources.com (Adapted Extract)

a) Define the term 'monopoly'

b) With the aid of a diagram, explain the long run equilibrium position of a

monopolist such as Qualcomm.

c) Analyse ONE reason why monopoly power may be damaging for

consumer welfare.

d) Analyse ONE barrier to entry that a firm might face when trying to enter

the market for computer chips.

[1]

[3]

[3]

[3]