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E. Napp Monopoly In this lesson, students will be able to identify characteristics of a monopoly. Students will be able to identify and/or define the following terms: Monopoly Natural Monopoly Patent
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E. Napp A monopoly is a market dominated by a single seller.
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E. Napp Monopoly A monopoly is a market dominated by a single seller. In general, monopolies are illegal. Monopolies lead to higher prices, inferior quality of products, and reduced supply.
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E. Napp Monopolies can lead to higher prices. Monopolies do not benefit consumers.
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E. Napp Antitrust Laws The government generally prevents monopolies from forming or breaks up existing monopolies. Antitrust laws are laws that prevent the formation and continuation of monopolies. The government recognizes that monopolies do not benefit consumers.
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E. Napp The government carefully watches market activity and prevents the formation of most monopolies.
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E. Napp Natural Monopolies However, the government does allow the formation of some monopolies. A natural monopoly occurs when a market runs most efficiently with one firm supplying all of the output. An example of a natural monopoly is public water.
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E. Napp Rather than building an overlapping network of pipes, one company serves customers best.
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E. Napp Patents A patent also provides a supplier with monopoly power. A patent is a license given to the inventor of a product to be the sole supplier of the product for a number of years. A patent is an incentive for invention.
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E. Napp Nextel had a patent for a number of years on one of its phone features.
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E. Napp The Market Spectrum Perfect competition is vastly different than a monopoly. In perfect competition, many sellers sell identical products. In a monopoly, a single seller is the sole supplier.
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E. Napp The old monopolies have been broken up.
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E. Napp The phone company was once a natural monopoly. The government has since deregulated it.
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E. Napp Questions for Reflection: Define monopoly. List three problems created by monopolies. Why does the government enforce Antitrust laws? Why is public water a natural monopoly? What happens when a market is deregulated?
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