Monopoly

Content 1. Monopoly is Monopoly is 2. Monopolies product Monopolies product 3. Monopoly and Government Monopoly and Government 4. Types of monopolies: Types of monopolies Natural Monopoly Geographic Monopolies Technological Monopolies Government Monopolies

Monopoly is Market situation, where one producer (or a group of producers acting in concert) controls supply of a good or service, and where the entry of new producers is prevented or highly restricted.

Monopolistic products A product can be a good, such as jewelry, computers, energy, or it can be a service, such as garbage disposal, sewage removal.

Monopoly and Government Most governments try to control monopolies by: o imposing price controls o taking over their ownership (called 'nationalization') o breaking them up into two or more competing firms.

Monopoly and Government realize economies of scale for competing internationally, or where two or more producers would be wasteful or pointless (as in the case of utilities). Sometimes governments facilitate the creation of monopolies for reasons of national security, to

Types of monopolies Economists differentiate between different types of monopolies: Natural Monopoly Geographic Monopolies Technological Monopolies Government Monopolies

Natural Monopoly Natural Monopoly occurs when the type of industry makes it financially impractical or impossible, for multiple companies to engage in the business. For example, sewage industry.

Geographic Monopolies Geographic Monopolies occur when there is only one company that offers a particular good or service in an area. For example, in a small town there may only one general store, which has a monopoly on the goods it sells.

Technological Monopolies Occur when the good or service the company provides is has legal protection in the form of a patent or copyright. For example, if a company develops and patents a drug to cure brain cancer, that company has a legal monopoly over that drug.

Government Monopolies Sometimes a government will pass laws reserving a specific trade, product or service for government agencies. For example, there is a monopoly on tobacco, matches, alcohol in Italy.

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