How does the government try to reduce monopolies?

The government seeks to reduce monopolies primarily through legislation that aims to fragment industries. This approach often involves implementing antitrust laws or regulations designed to promote competition and prevent companies from dominating a market. By breaking up monopolies or preventing mergers that would significantly lessen competition, the government can foster a business environment where multiple firms can operate.

Fragmenting industries allows for more competition, which can lead to better prices and services for consumers. It helps to ensure that no single company can control an entire market, thereby promoting innovation and efficiency as companies strive to outdo each other.

The other approaches listed do not align with the government's aim to limit monopolistic practices. For instance, allowing companies to merge freely would likely contribute to the formation of monopolies rather than reducing them. Lowering taxes on monopolies or granting subsidies to dominant firms would provide them with greater financial power, which could further entrench their market position rather than fostering competition. Thus, the correct approach lies in actively promoting competition through legislative measures that fragment existing monopolies.