1. Monopolies Definition, Causes & Pricing

2. Monopoly Market Characteristics One Seller Unique Product—no substitutes Difficult/Impossible to enter or leave industry Limited Information Price Setters (high level of price control)

3. Examples of Monopolies Electric Utilities Water for your home If the buyer cannot obtain a good elsewhere--owners have a local monopoly Utilities: Electricity, Gas & Water

4. WHY DO MONOPOLIES ARISE? The fundamental cause of monopoly is Barriers to Entry 3 primary sources of barriers: 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 i.e. Economies of scale

5. Economies of Scale Definition: when larger firms are more efficient than small firms - As firms increase production => average cost per unit falls - small firms can’t compete! Average Cost Importance: Industries with economies of scale will have larger firms

6. Government Regulation Antitrust laws (1890) - a collection of statutes aimed at curbing monopoly power by: –Breaking up companies –Preventing mergers –Regulating pricing Perfect Together?

7. Fair Fight in the Market Place Video…show 15 minutes (end with ADM)

8. End Result of a Monopoly Monopolies result in a higher price & lower Quantity –Versus perfect competition Monopoly profit greater than zero economic profit Less variety of products, less innovation

9. Perfect Together? Benefits Costs Reading….

10. Google a Monopoly? http://www.bloomberg.com/video/68342548/

11. Why do Monopolies exist?