Monopolies

Monopoly and its Characteristics Single Supplier of goods there is only one seller of a product that has no close substitutes. The company is the price marker. There is no competition, they can set their own prices. Example: De Beers Diamonds once produced more than half of the world’s diamonds supply.

Barriers to Entry other companies may want to enter the market, but there is something that hinders or prevents them from entering. This comes from three main sources: Resource is owned by a single company Government gives a single company the exclusive rights to produce something. The costs of production are expensive and complicated so a single producer is more efficient than many producers.

Natural Monopoly & DTE Energy Types of Monopolies Natural Monopoly & DTE Energy exists when the costs of production are lowest when only one firm provides output. Example: Most public utilities. (electricity, natural gas, sewage, & water) Because the system of getting electricity to people in homes and business is very complex and costly. It makes sense that one company would undertake it and provide it for all people in an area.

Government Monopoly & Secretary of State exists when the gov’t either owns and runs a business or authorizes only one producer to create goods/service. The gov’t provides these goods/services that either could not be provided by private firms or that are not attractive to them because of the lack of profit opportunities.

Geographic Monopoly: Gas Station Technological Monopoly: Polaroid through the use of gov’t issued patents firms are able to exclude other firms from competing with them. Example: Polaroid had a patent over instant cameras and film which prohibited Kodak from making one as well. Geographic Monopoly: Gas Station Example: You own a gas station on a rural stretch of road and there is not another one for 100 miles. You can charge a high price because people will be forced to buy it or they will run out.