LS 120 - CHAPTER 12 Monopoly Market Power Market power and...

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1 Monopoly CHAPTER 12 Market Power Market power and competition are the two forces that operate in most markets. Market power is the ability to influence the market, and in particular the market price, by influencing the total quantity offered for sale. A monopoly is an industry that produces a good or service for which no close substitute exists and in which there is one supplier that is protected from competition by a barrier preventing the entry of new firms. Market Power How Monopoly Arises A monopoly has two key features: No close substitutes Barriers to entry Barriers to Entry Legal or natural constraints that protect a firm from potential competitors are called barriers to entry . There are two types of barriers to entry: legal and natural.
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