MARKET STRUCTURES MONOPOLY

O FORM WHEN BARRIERS PREVENT FIRMS FROM ENTERING A MARKET THAT HAS A SINGLE SUPPLIER O CAN TAKE ADVANTAGE OF THEIR MARKET AND CHARGE HIGH PRICES O MOST MONOPOLY PRACTICES ARE OUTLAWED IN THE U.S.

ECONOMIES OF SCALE O WHEN A PRODUCER’S AVERAGE COST PER UNIT FALLS AS PRODUCTION RISES O BIG CHAIN SUPERMARKET EXAMPLE

NATURAL MONOPOLY O MARKET THAT RUNS MOST EFFICIENTLY WHEN ONE LARGE FIRM PROVIDES ALL THE OUTPUT O AT&T & PUBLIC WATER O GOVERNMENT WILL STEP IN AND ALLOW ONE FIRM IN EACH GEOGRAPHIC REGION

GOVERNMENT MONOPOLY O MONOPOLY CREATED BY THE GOVERNMENT O MANY ARE NATURAL MONOPOLIES O ISSUE PATENTS O PATENT: A LICENSE THAT GIVES THE INVENTOR OF A NEW PRODUCT THE EXCLUSIVE RIGHT TO SELL IT FOR A CERTAIN TIME PERIOD O PATENTS ENCOURAGE FIRMS TO RESEARCH AND DEVELOP NEW PRODUCTS THAT BENEFIT SOCIETY O ts.jsp#heading-4 ts.jsp#heading-4

GOVERNMENT MONOPOLIES O Rare Cases: Government will allow companies in an industry to restrict the number of firms in a market O Major League Baseball & other Professional Sports Leagues are examples of this (Exemptions from Anti-Trust Laws) Why do you think they do this?

PRICING O Monopolists have the power to control pricing O PRICE DISCRIMINATION: CHARGING A DIFFERENT PRICE TO DIFFERENT GROUPS O DISCOUNTED AIRLINE FARES O SENIOR CITIZEN AND STUDENT DISCOUNTS O CHILDREN “FREE” O Luxottica 60 minutes segment