1. Monopoly

2. What is a monopoly? A market dominated by a single firm.
There are no variety of goods in the market.
The firm has complete control over price.
Barriers prevent other firms from entering the market

3. Types of Monopolies

4. 1. Natural Monopoly Market that runs most efficiently as a monopoly
Less resources are wasted
Approved by government
What resources do you need for public water?

7. Why don’t water companies charge monopoly like prices?
1. Natural Monopolies
Why don’t water companies charge monopoly like prices?
Agrees to let government control the prices

8. 2. Franchises

9. 2. Franchise
Contract that gives a single firm the right to sell its goods within an exclusive market

11. Not a franchise

12. What franchises are in this school?

13. 3. Technological Monopolies

14. 3. Technological Monopolies
Patents that are given to companies
This gives the company exclusive rights to sell a product for a temporary period of time.

15. What has been proven to be the most deadly in the month of July?

16. Do you think it would be expensive to research and develop this vaccine?
Lets pretend we all work for a pharmaceutical company. Our goal is to research and develop a one time vaccination that will prevent the negative effects of the sun for a lifetime. (Don’t worry, you can still get a tan)

17. So how can patents provide an incentive for our pharmaceutical company to continue the expensive research and develop of this vaccine?
Then we can be the only company selling the vaccine and make monopoly profits!!!

18. 3. Technological Monopolies
Patents promote innovation but leads to high prices

19. Patents and Consumers
Video Time

20. When a monopolist produces more of their product, the price will fall.
Monopolists Dilemma
When a monopolist produces more of their product, the price will fall.
Law of demand still applies to them!

21. Main feature of a monopoly
Price Discrimination
The division of customers into groups based on how much they will pay for a good
Main feature of a monopoly

24. Price Discrimination Can ONLY work when:
A firm has market power
A firm has distinct customers
What is being sold must be difficult to resell
Senior citizen discount

25. Government Regulating Competition

26. Trust/Mergers Grouping of firms This can discourage competition
Usually when one firm buys another
This can discourage competition
What firm is REALLY good at doing this?

27. Allowing Mergers Companies must prove at least one of the following:
A merger would lower costs
A merger would lower consumer prices
A merger would lead to a better product
The company would not become too powerful

28. Does this merger meet one of those 3?

29. Ending Monopolies

30. Antitrust Laws Laws that outlaw mergers Companies joining together
Encourages competition in the workplace

31. Continued…
Governments can use antitrust law to break up monopolies gaining too much market power
Broke up the American Tobacco Company
What competitors entered the market after this break up?

32. Deregulation Removal of some government controls over a market
Forces firms to compete more by removing barriers of entry
Can cause economic growth
Can hurt consumers