Sara Staschke

Google abused its monopoly power, FTC experts found

Article 11

Summary: This article discusses how Google is considered a monopoly and why. It informs us on the
search engine optimization tools Google uses and how this effects the consumers in different
markets. Google owns websites, charges for advertising, and creates reviews sometimes hurting
businesses.
Analysis: Google is a Firm1 (Any organization of individuals that purchase Factors of Production (an
input used in the production of a good orservice such as labor, capital, and raw materials) in order
to produce goods and services that are sold to) that uses Labor and Human Resources2 (physical
and mental work effort of human beings) as well as Capital and Investment Goods3 (productive
implements made by people to make more things), and a lot of Technology4 (The practical
applications of scientific knowledge), utilizing most of the Factors of Production5 (resources or
inputs). In the eyes of Wall Street, another firm, Google is a Monopoly6 (The only supplier of a
unique product with no close substitutesThe monopolists demand curve is downward-sloping since
the monopolist is the industry.). The article states, The staff did find that Google (GOOG) posed
"real harm to consumers and to innovation." (Pagilery, 2015) Jose mentions how google is creating
externalities7 (Externalities occur when costs or benefits accrue to an individual who is external to
the market transaction. Government can have a positive role in a market economy by providing
public goods and correcting for over- and under-allocation of resources when there are externalities.
But identifying and correcting for market failures can be difficult, time consuming, and costly
especially when clouded by political agendas.) For the consumers8 (a person who purchases goods
and services for personal use.) of their service9 (intangible item). The lawyers and investigators
used normative economics10 (the attempts to assess the economy and economic polocies using
value judgement) as well as positive economics11 (attempts to assess the economy and economic
policies using scientific facts) to evaluate the severity of the effect Google has on its consumers.
The market12 (buyers and sellers in the same place at the same time) for Google is very
constrained13 (limiting factors) considering they own almost all online sites we use. The
entrepreneurial incentives14 (Monopoly power creates a tremendous incentive for invention and
innovation) are being constrained by Googles lack of competition. This is the exact opposite of
perfect competition15 (Perfectly competitive firms are pretty much faceless - they have no brand

image, no real market recognition. A perfectly competitive firm is one whose output is so small in
relation to market volume that its output decisions have no perceptible impact on price. ) which is
considered the best outcome for sellers. These types of economies16 (the wealth and resources of a
country or region, especially in terms of the production and consumption of goods and services.)
are best when the goal is profit maximization17 (A firm whose primary goal is to maximize the
difference between total revenue and total costs). The opportunity cost18 (the value of the best
alternative choice sacrificed) for Google is outweighed as they will need to change how they run
their company. Their equilibrium price19 (The price at which the quantity demanded of a good in a
given time period equals the quantity supplied of that good) for advertising is very high because
they create the industry standards for websites, allow customers to review the businesses, and
have a huge impact on the successfulness of a company. This gives new business incentive20
(something that induces a person to act) to use Googles SEO tools, paying Google more money to
make sure their website is ranked well. These human resources are scarce21 (limited resources) and
cost a lot of money.