Definition of a Monopolist:
A single supplier that comprises its
entire industry for a good or service for which there is no close
substitute.
Barriers to Entry:
For any amount of monopoly power to continue to
exist in the long-run, the market must be closed to entry in some way.
Either legal means or certain aspects of the industry’s technical or cost
structure may prevent entry.
Economies of Scale:
When economies of scale exist firms with larger
output have lower average costs that enable them to charge a lower
price and drive smaller firms out of business.
Natural monopoly
arises when there are large economies of scale
relative to the industry’s demand, and one firm can produce at a lower
average cost than can be achieved by multiple firms.
Licenses, Franchises, and Certificates of Convenience:
In many
industries it is illegal to enter without a government license, or
certificate of convenience and public necessity. Because franchises or
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- Fall '11
- Dsilvia
- Economics, Monopoly, Perfect Competition, fi rms, 20 years
-
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