Final answer:
Government activities can both promote competition and limit monopoly power; for example, preventing mergers can preserve competition, while regulating prices in natural monopolies can help prevent abuse of market power.
Step-by-step explanation:
Whether government activities promote competition or limit monopoly power by regulating markets is a central question in understanding public policy issues about competition. Here's how each of the activities mentioned affects market competition:
- Limiting content on public airwaves can limit competition by restricting the number of voices and the type of content that can be broadcast, potentially giving an advantage to certain broadcasters over others.
- Directing local cable companies to reduce Internet fees for rural consumers can promote competition by making it more affordable for consumers to access services, potentially allowing more providers to compete for these customers.
- Forcing a municipal water company to limit rate increases can be seen as a form of price regulation typically associated with natural monopolies, which can help to prevent the monopolistic pricing that could occur in the absence of competition.
- Preventing the merger of two pharmaceutical companies is a direct action to limit monopoly power and ensure that competition remains by not allowing the market to become overly concentrated.
- Breaking up Standard Oil into smaller companies is a historical example of antitrust action taken to dismantle a monopoly and to spur competition in the market.
It is essential to note that the aim of these government interventions is often to balance the desire for free market competition with the necessity to control monopolistic practices and protect consumers.