Competition drives prices down to costs, whereas monopolies price above cost. California banks have.

Competition drives prices down to costs, whereas monopolies price above cost. California banks have paid large damages for allegedly charging fees greater than the cost of certain services that they provide. Suppose a car manufacturer charges an additional $450 for an automatic transmission in a new car. What inefficiencies would result if the consumer could sue the manufacturer and make the company prove that $450 is not disproportionately above the actual cost of the automatic transmission?

 

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