ECN607 – Lectureaid_6.2

ECN607 – Lectureaid_6.2 - ECN607 Managerial...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECN607 – Managerial Economics Study Aid: lecture 6.2 Definition of a Monopoly A pure monopoly exists where a single firm is the only supplier of a good or service and where no substitutes exist. Barriers to Entry Barriers to entry serve to block competitors from entering an industry. Barriers to entry include the following: Exclusive ownership or control over a resource: At one point in time, DeBeers owned over 80% of the world's diamond mines. Because diamond mines are scarce, competitors were unable to have access to diamond mines to enter the retail diamond industry. Limited capital: Some industries such as the airline industry require large capital outlays for fleets of jets, hangar space, and terminal space such that these high entry costs effectively deter competition. Scale economies: Wal-Mart is able to purchase large quantities and realize cost discounts in order to pass these savings down to customers; economists call these economies of scales. Smaller retail stores do not have this advantage and are effectively blocked from entering and/or surviving against Wal-Mart. Government-imposed barriers include these: Licenses: Requiring a license such as a cosmetology license serves as a barrier to entry. Patents: For a period of 17 years, an inventor who has a patent on a product enjoys the protection of not having someone else copy or imitate the invention.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/16/2010 for the course BUS ECON607 taught by Professor Tbd during the Spring '10 term at Grand Canyon.

Page1 / 2

ECN607 – Lectureaid_6.2 - ECN607 Managerial...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online