2. Table of Contents Access Prior Knowledge New Information Set Goals
Activity
Conclusion
The Board Game
“Monopoly”
Learning Targets
Characteristics of
Monopoly
Is This a Monopoly?
“Monopoly”
Learning Targets
Barriers to Entry
Types of Monopoly
Monopoly and
Market Power
Preventing
Monopolies
Regulating
Monopolies

3. The Board Game
Monopoly is an economic concept and it is also the name of a famous board game first produced by Parker Brothers in The goal of this exercise is to determine whether or not the word “Monopoly” is a good name for this board game. The definition of monopoly and its characteristics are listed below. For each one, explain whether you think the board game fits that description or not. (If you have never played Monopoly, or if you cannot remember exactly how the game is played, the directions are summarized below.)
The worksheet with the same name (“The Board Game”) should be passed out at this time to each student. The directions on the slideshow are identical to the worksheet. Refer to the teacher lesson plan and answer key for more information.

4. The Board Game
Monopoly is an economic concept and it is also the name of a famous board game first produced by Parker Brothers in The goal of this exercise is to determine whether or not the word “Monopoly” is a good name for this board game. The definition of monopoly and its characteristics are listed below. For each one, explain whether you think the board game fits that description or not. (If you have never played Monopoly, or if you cannot remember exactly how the game is played, the directions are summarized below.)
1) One Seller
See How to Play
Monopoly
2) No Substitutes
3) High Barriers to Entry
4) Control Over Price
The phrases listed for numbers are the same as on the student worksheet. There are also additional explanations for each on the student worksheet. Refer to the answer key for sample answers to each question.
5) Types of Monopoly (Geographic, Technological, Legal, and Natural)
6) Do you think “Monopoly” is a good name for this board game? Why or why not?

5. How to Play Monopoly
There are usually players. Each player starts with the same amount of money and a game piece on the “GO” square. Each player takes a turn rolling the dice and moves his/her piece that many spaces. If the player lands on a property (marked by the colored tiles), he/she may purchase that property. If the player lands on a tile that is not a property, he/she follows the directions for what to do on that tile. The four railroads are treated like properties and the two utility squares (Electric Company and Water Works) can also be purchased. Any time a player lands on a property he/she does not own, he/she must pay the indicated rent to the owner. If a player obtains possession of all the properties of a single color, he/she has a “monopoly.” Once a player obtains a monopoly, he/she may purchase houses or hotels to place on the properties, which makes the rents much more expensive. The goal of the game is to make the other players go bankrupt. A player wins when he/she is the only player left with any money.
This is a simple summary of how the game Monopoly is played, if needed.

6. “Monopoly” Learning Targets
Knowledge 3 Define and understand characteristics of a monopoly market
Reasoning 4 Describe reasons for and against the
regulation of monopolies.

7. Characteristics of Monopoly
There are several traits that characterize a monopoly. The four most important ones are described here.

8. Characteristics of Monopoly
There are several traits that characterize a monopoly. The four most important ones are described here.
1) One Seller
Monopolies exist when one firm controls an entire market (or almost all of it).
Microsoft owns over 95% of the operating system market, but it does have competition from Mac and Linux operating systems.

9. Characteristics of Monopoly
There are several traits that characterize a monopoly. The four most important ones are described here.
1) One Seller
Monopolies exist when one firm controls an entire market (or almost all of it).
2) No Substitutes
If there are substitutes to the product supplied by the monopolist, he/she cannot exercise monopoly power.
The National Football League (NFL) has no close substitutes. Yes, there are other similar leagues, but none that compare to the NFL.

10. Characteristics of Monopoly
There are several traits that characterize a monopoly. The four most important ones are described here.
1) One Seller
Monopolies exist when one firm controls an entire market (or almost all of it).
2) No Substitutes
If there are substitutes to the product supplied by the monopolist, he/she cannot exercise monopoly power.
3) High Barriers to Entry
A monopolist remains the single seller in a market only because he/she can keep others from entering the market.
A barrier to having competing electrical companies is that cities are not willing to have more than one set of power lines.

11. Characteristics of Monopoly
There are several traits that characterize a monopoly. The four most important ones are described here.
1) One Seller
Monopolies exist when one firm controls an entire market (or almost all of it).
2) No Substitutes
If there are substitutes to the product supplied by the monopolist, he/she cannot exercise monopoly power.
3) High Barriers to Entry
A monopolist remains the single seller in a market only because he/she can keep others from entering the market.
De Beers, a company that controls most of the world’s supply of diamonds, artificially increases price by limiting its output.
4) Control Over Price
A true monopolist can change price and quantity to maximize profits.

12. Barriers to Entry
A monopolist’s profits do not go unnoticed. So why don’t other firms enter the market? One of the following barriers keeps others from entering the market.

13. Barriers to Entry 1) Control of a Resource
A monopolist’s profits do not go unnoticed. So why don’t other firms enter the market? One of the following barriers keeps others from entering the market.
1) Control of a Resource
If a firm controls all or most of a scarce resource, it is easy to keep other firms from obtaining it.
De Beers controls most of the world’s diamond supply, making entry into the market very difficult.

14. Barriers to Entry 1) Control of a Resource
A monopolist’s profits do not go unnoticed. So why don’t other firms enter the market? One of the following barriers keeps others from entering the market.
1) Control of a Resource
If a firm controls all or most of a scarce resource, it is easy to keep other firms from obtaining it.
2) Technological Superiority
Firms can gain a technological advantage over competitors that can lead to a monopoly.
Intel produces the chips that run computers. For many years no other firms were able to match their microprocessor technology.

15. Barriers to Entry 1) Control of a Resource
A monopolist’s profits do not go unnoticed. So why don’t other firms enter the market? One of the following barriers keeps others from entering the market.
1) Control of a Resource
If a firm controls all or most of a scarce resource, it is easy to keep other firms from obtaining it.
2) Technological Superiority
Firms can gain a technological advantage over competitors that can lead to a monopoly.
3) Government Involvement
The government can restrict firms from entering a market through patents, copyrights, and laws.
Sometimes government will actually run a monopolistic business, or it can issue patents and copyrights.

16. Barriers to Entry 1) Control of a Resource
A monopolist’s profits do not go unnoticed. So why don’t other firms enter the market? One of the following barriers keeps others from entering the market.
1) Control of a Resource
If a firm controls all or most of a scarce resource, it is easy to keep other firms from obtaining it.
2) Technological Superiority
Firms can gain a technological advantage over competitors that can lead to a monopoly.
3) Government Involvement
The government can restrict firms from entering a market through patents, copyrights, and laws.
The enormous upfront costs of power companies makes it very difficult to start a competing business.
4) Economies of Scale
A monopoly can exist if one company has a cost advantage over new firms.

17. Types of Monopoly
There are four types of monopolies. Each one gets its market power from the way in which it bars entry into the market.

18. Types of Monopoly 1) Geographic Monopoly
There are four types of monopolies. Each one gets its market power from the way in which it bars entry into the market.
1) Geographic Monopoly
If there is only one store in a location, it acts as a monopoly since it has no local competition.
Notice how the type of monopoly matches the way in which it bars other firms from entering the market. The student note sheet is set up to show that each one of these notes matches with the notes from the Barriers to Entry slides. Unfortunately, the geographic monopoly does not correspond very well to “Control of a Resource.” But the other ones correspond perfectly. “Technological Superiority” goes with “Technological Monopoly.” “Government Involvement” goes with “Legal Monopoly.” And “Economies of Scale” goes with “Natural Monopoly.”
A single gas station along a lonely road in the desert is an example of a geographic monopoly.

19. Types of Monopoly 1) Geographic Monopoly 2) Technological Monopoly
There are four types of monopolies. Each one gets its market power from the way in which it bars entry into the market.
1) Geographic Monopoly
If there is only one store in a location, it acts as a monopoly since it has no local competition.
2) Technological Monopoly
Although firms can enjoy a technological edge in the short run, other firms will soon copy it.
Despite Intel’s early success, it now experiences a tremendous amount of competition.

20. Types of Monopoly 1) Geographic Monopoly 2) Technological Monopoly
There are four types of monopolies. Each one gets its market power from the way in which it bars entry into the market.
1) Geographic Monopoly
If there is only one store in a location, it acts as a monopoly since it has no local competition.
2) Technological Monopoly
Although firms can enjoy a technological edge in the short run, other firms will soon copy it.
3) Legal Monopoly
Sometimes the government deems it necessary to create a monopoly.
By allowing drug companies to patent their discoveries for 20 years, it encourages heavy investment in research and development.

21. Types of Monopoly 1) Geographic Monopoly 2) Technological Monopoly
There are four types of monopolies. Each one gets its market power from the way in which it bars entry into the market.
1) Geographic Monopoly
Economies of Scale
Diseconomies of Scale D
ATC
If there is only one store in a location, it acts as a monopoly since it has no local competition.
2) Technological Monopoly
Although firms can enjoy a technological edge in the short run, other firms will soon copy it.
3) Legal Monopoly
Economies of scale exist when Average Total Cost (ATC) is decreasing. Diseconomies of scale exist when ATC is increasing. If this lesson is being used with the entire Unit Plan for “Market Structure,” this graph should make sense to the students. Natural monopolies include things like the electric company, natural gas company, sewer, and to some degree cable and internet services. Natural monopolies usually exist when there are large upfront fixed costs.
Sometimes the government deems it necessary to create a monopoly.
4) Natural Monopoly
If Average Total Cost (ATC) is still decreasing at the output level, the firm is still in the economy of scale portion of the graph.
Exist when 1 company can produce items cheaper than 2 competing firms.

22. Monopoly and Market Power
The monopolist is a price maker, which means he/she can change the price of the product in order to maximize profits.

23. Monopoly and Market Power
The monopolist is a price maker, which means he/she can change the price of the product in order to maximize profits.
1) Monopolists do not sell at the competitive price and quantity. D S PC
This graph illustrates the typical output and price of a perfectly competitive market. This is NOT the point at which monopolies produce and sell. Allow students time to copy down the graph onto their note sheets. QC
In a perfectly competitive industry, the price and quantity are determined by the intersection of supply and demand.

24. Monopoly and Market Power
The monopolist is a price maker, which means he/she can change the price of the product in order to maximize profits.
1) Monopolists do not sell at the competitive price and quantity. D S
2) By restricting output, a monopolist can increase price. PM PC QM QC
Notice how quantity has been reduced to QM, which means price can be raised to PM.

25. Monopoly and Market Power
The monopolist is a price maker, which means he/she can change the price of the product in order to maximize profits.
1) Monopolists do not sell at the competitive price and quantity. D S
2) By restricting output, a monopolist can increase price. PM PC
3) When a monopolist increases price above the competitive level, he/she is using market power. QM QC
Notice how quantity has been reduced to QM, which means price can be raised to PM.

26. Monopoly and Market Power
The monopolist is a price maker, which means he/she can change the price of the product in order to maximize profits.
1) Monopolists do not sell at the competitive price and quantity. D S
2) By restricting output, a monopolist can increase price. PM PC
3) When a monopolist increases price above the competitive level, he/she is using market power. QM QC
4) Perfectly competitive firms have no market power, while monopolists have a lot.
Notice how quantity has been reduced to QM, which means price can be raised to PM.

27. Preventing Monopolies
Because monopolies want to restrict output to increase price (and their profits), most people consider them undesirable and inefficient.

28. Preventing Monopolies
Because monopolies want to restrict output to increase price (and their profits), most people consider them undesirable and inefficient.
1) Monopolies are inefficient since the costs to the consumer outweigh the benefits to the firm.

29. Preventing Monopolies
Because monopolies want to restrict output to increase price (and their profits), most people consider them undesirable and inefficient.
1) Monopolies are inefficient since the costs to the consumer outweigh the benefits to the firm.
2) Part of the consumer surplus is not captured under the monopoly, which is a deadweight loss.
Only discuss these graphs with the students if they have an understanding of consumer surplus from previous lessons or units. If the students do not know these concepts, simply skip explaining the graphs. Notice how large the consumer surplus is when the market is in perfect competition. Because the monopolist will limit output to increase price, some potential customers will be lost, even though they would buy the product at the equilibrium price. These lost customers are the “deadweight loss.” The monopolist will do this in order to capture some of the consumer surplus in the form of profits. Notice how the monopolist severely decreases the size of the consumer surplus, but is unable to capture all of it as profits. This is why monopolies are considered inefficient.

30. Preventing Monopolies
Because monopolies want to restrict output to increase price (and their profits), most people consider them undesirable and inefficient.
1) Monopolies are inefficient since the costs to the consumer outweigh the benefits to the firm.
2) Part of the consumer surplus is not captured under the monopoly, which is a deadweight loss.
3) Government may get involved if there is market failure like this.

31. Preventing Monopolies
Because monopolies want to restrict output to increase price (and their profits), most people consider them undesirable and inefficient.
1) Monopolies are inefficient since the costs to the consumer outweigh the benefits to the firm.
2) Part of the consumer surplus is not captured under the monopoly = deadweight loss.
3) Government may get involved if there is market failure like this.
4) Government can prevent the monopoly from forming or break it into competing firms. = antitrust laws.

32. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.

33. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.
1) Though these monopolies may be needed, they are still inefficient. There are two solutions.

34. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.
1) Though these monopolies may be needed, they are still inefficient. There are two solutions.
A) Government takes ownership of the firm (public ownership).
Amtrak is publicly owned by the government.

35. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.
1) Though these monopolies may be needed, they are still inefficient. There are two solutions.
A) Government takes ownership of the firm (public ownership).
B) Government reduces prices by setting them near equilibrium (price regulation).
Amtrak is publicly owned by the government.
The natural gas market has been heavily regulated in the past.

36. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.
1) Though these monopolies may be needed, they are still inefficient. There are two solutions.
A) Government takes ownership of the firm (public ownership).
B) Government reduces prices by setting them near equilibrium (price regulation).
Amtrak is an example of this phenomenon.
2) Public ownership, however, leads to high costs and low quality.

37. Regulating Monopolies
Sometimes it is necessary to have monopolies, especially if they are natural monopolies or legal monopolies.
1) Though these monopolies may be needed, they are still inefficient.
A) Government takes ownership of the firm (public ownership).
B) Government reduces prices by setting them near equilibrium (price regulation).
Amtrak is an example of this phenomenon.
2) Public ownership, however, leads to high costs - low quality.
3) Price regulation can work, just as long as price is not set below equilibrium.
Natural gas prices were set below equilibrium in the 1970s, causing massive shortages.

38. Is This a Monopoly? DIRECTIONS
Several firms have been listed below. First, determine which market that firm is in. Then, use the characteristics of monopoly to decide whether each firm is a monopolist or not. There are questions for each characteristic of monopoly. Finally, if the firm is a monopolist, decide whether it is a geographic, technological, legal, or natural monopoly.
(a) Complete this version if you feel you need the
teacher to work with you on this topic.
(b) Complete this version if you feel you have a fairly
good understanding of this topic.
(c) Complete this version if you feel this topic is easy.
These are the directions for the Class Activity that is included in the download. You may differentiate instruction by using the three different versions, or you may decide to simply use just one version for the whole class.

39. “Monopoly” Learning Targets
Knowledge 3 Understand the definition and
characteristics of a market that is in
monopoly.
Reasoning 4 Describe reasons for and against the
regulation of monopolies.

40. Resources