Monopolies Definition, Causes & Pricing Chapter 15.

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Presentation transcript:

Monopolies Definition, Causes & Pricing Chapter 15

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

Monopoly 5 Market Characteristics One Seller Unique Product—no substitute Difficult/Impossible to enter/exit industry Limited Information Great deal of price control— Price Setters Perfect Competition # Sellers Product Entry/Exit Information Price Control Characteristics Unlimited 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?

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