a larger number of competitors in a marketplace, and what role should the government play in this balancing act?

The previous chapters on the theory of the firm identified three important lessons: First, that competition, by

providing consumers with lower prices and a variety of innovative products, is a good thing; second, that large-

scale production can dramatically lower average costs; and third, that markets in the real world are rarely

perfectly competitive. As a consequence, government policymakers must determine how much to intervene to

balance the potential benefits of large-scale production against the potential loss of competition that can occur

when businesses grow in size, especially through mergers.

For example, in 2006, AT&T and BellSouth proposed a merger. At the time, there were very few mobile phone

service providers. Both the Justice Department and the FCC blocked the proposal.
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