Definition, Causes & Antitrust Laws Chapter 15

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Presentation transcript:

Definition, Causes & Antitrust Laws Chapter 15 Monopolies Definition, Causes & Antitrust Laws Chapter 15

4 Market Structures Lowest Price Highest Quantity Highest Price No DWL Lowest Quantity Largest DWL Perfect Competition Monopolistic Competition Monopoly Oligopoly Most competitive Least competitive

Monopoly 5 Market Characteristics Perfect Competition # Sellers Product Entry/Exit Information Price Control One Seller Unique Product—no substitute Difficult/Impossible Limited Information Great deal of price control— Price Setter Unlimited Homogenous (Exactly Same) Free, quick Perfect Info. No Price Control (price taker)

Barriers to Entry Primary cause of a monopoly industry is Barriers to Entry Barriers make it difficult to “enter the market” 3 Primary Barriers to Entry: 1) Ownership of a key resource 2) Government gives one firm the exclusive right to produce 3) Costs of production make a single producer more efficient

Natural Monopolies A Natural Monopoly is when a single firm can supply a good/service at a lower cost They develop in industries with large economies of scale Examples: Utilities: Electricity, Gas & Water Qty Produced => ATC

Government Regulation Antitrust laws (1890) - a collection of statutes aimed at curbing monopoly power by: Breaking up companies Preventing mergers Regulating pricing Perfect Together?

Proposed Merger in 2014 wanted to buy Would 2 companies have been enough competition?

Final decision: Government denied the merger of ATT with T-Mobile

Anti-trust law video 14 minutes