Explain why monopolies were not illegal before the 1890s.

Monopolies in the United States are not illegal, but the Sherman Anti-Trust Act prevents them from using their power to gain advantages. Congress enacted it in 1890 when monopolies were trusts. A group of companies would form a trust to fix prices low enough to drive competitors out of business.

Monopolies restrict free trade and prevent the market from setting prices. That creates the following four adverse effects:

Price fixing: Since monopolies are lone providers, they can set any price they choose. That's called price-fixing. They can do this regardless of demand because they know consumers have no choice. It's especially true when there is inelastic demand for goods and services. That's when people don't have a lot of flexibility. Gasoline is an example.2  Some drivers could switch to mass transit or bicycles, but most can't.

Declining product quality: Not only can monopolies raise prices, but they also can supply inferior products. That's happened in some urban neighborhoods, where grocery stores know poor residents have few alternatives.

Loss of innovation: Monopolies lose any incentive to innovate or provide "new and improved" products. A 2017 study by the National Bureau of Economic Research found that U.S. businesses have invested less than expected since 2000 due to a decline in competition.3  That was true of cable companies until satellite dishes and online streaming services disrupted their hold on the market.

die.

explanation:

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