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Monopoly

Monopolies are sole suppliers of products without close substitutes. Barriers to entry prevent new firms from competing equally with existing firms and can include legal restrictions like patents, licenses, and regulations; economies of scale where one large firm is more efficient; and control of essential resources critical for production like raw materials or infrastructure. Common barriers include patents providing temporary exclusivity, natural monopolies in utilities, and ownership of scarce resources like aluminum, sports teams, or diamonds. While barriers protect monopolies initially, economic profits draw competition over time as technology changes unless barriers are maintained.

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62 views2 pages

Monopoly

Monopolies are sole suppliers of products without close substitutes. Barriers to entry prevent new firms from competing equally with existing firms and can include legal restrictions like patents, licenses, and regulations; economies of scale where one large firm is more efficient; and control of essential resources critical for production like raw materials or infrastructure. Common barriers include patents providing temporary exclusivity, natural monopolies in utilities, and ownership of scarce resources like aluminum, sports teams, or diamonds. While barriers protect monopolies initially, economic profits draw competition over time as technology changes unless barriers are maintained.

Uploaded by

naseer_satti
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Monopoly:

Sole supplier of a product with no close substitutes

Barrier to entry:
Any impediment that prevents new firms. From entering an industry And competing on an equal basis with existing firms. Legal restrictions Economies of scale Control of essential resources

Legal restrictions
Patents and invention incentives Exclusive right to sell a product for 20 years from the date the patent application is filed. Incentive for innovation. Licenses and other entry restrictions. Government awarding an individual firm the exclusive right to supply a particular good or service. Federal and state license

Economies of scale
Natural monopoly Downward-sloping long-run average cost curve One firm can supply market demand at a lower average cost per unit than could two Firms.

Control of essential resources


Firms control over some resource critical to production Alcoa (aluminum) Control the supply of bauxite Professional sports leagues China (pandas) DeBeers Consolidated Mines (diamonds)

Barriers to Entry:
Supplying something that other producers cant match Unique experience Monopolies Local, national, international Long-lasting monopolies Rare - economic profit attracts competitors Technological change. 7

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