SS.912.E.2.6 Examine the benefits of natural monopolies and the purposes of government regulation of these monopolies Standard 2 Understand the fundamental concepts relevant to the institutions, structure, and functions of a national economy SS.912.E.2.6 Examine the benefits of natural monopolies and the purposes of government regulation of these monopolies

An entry barrier is something that prevents you from opening a business in a particular industry Preventions: (1) Sometimes you just need to start as a really big firm (example: nuclear power plant) (2) Another firm may have a license or patent that precludes you (example: USPS) (3) Somebody else owns the vital resource

Natural monopoly- a market situation in which the average costs of production continually decline with increased output; the average costs of production will be lowest when a single, large firm produces the entire output demanded by the market That is, one large firm can produce more efficiently and at a lower average cost than several smaller firms

With natural monopolies, it’s very difficult for new firms to open and compete with existing firms Therefore, the possibility of abusive market power exists The government may regulate these firms to eliminate or reduce possible abuses

Video: History Channel Black Gold rise of Standard

Focus: Understanding Economics in US History Lesson 25 The Economic Effects of the Nineteenth-Century Monopoly

Video: History Channel Black Gold breakup of Standard