The Impacts of Monopoly Unit 7.2

Monopolies Monopolies exist when there is a single supplier for a good, and the barriers to entry prevent other suppliers from entering the market. While monopolies are generally considered to be bad because they can limit the quantity supplied and can charge whatever they want, there are other kinds of monopolies that economists love.

Characteristics of Monopoly Price Maker High Barriers to Entry One Seller Cartel Organization of similar producers Conspire to set prices

Types of Monopoly Natural Monopoly Government Monopoly Patent Copyright License Technological Monopoly Geographic Monopoly

Economies of Scale An economy of scale is where a business’ costs continue to drop with each product made. Normally after a certain amount, the cost of making each additional product falls for a time (startup costs are large initially, an the cost to make an individual item small), but eventually the cost rises again. With an economy of scale, the cost keeps dropping, up to the limit of supplying the entire world market. This is where a single business can produce enough of a good for everyone, and do it cheaply.