This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Pure Monopolies A pure monopoly is a firm that satisfies the following conditions: 1. It is the only supplier in the market. 2. There is no close substitute to the output good. 3. There is no threat of competition. \In practice, pure monopolies are very rare. For instance, a supermarket may be the only food supplier in a particular town, but if it raises its prices and retains too much of a profit, a competitor may enter the space. Even the threat of serious competition entering the market forces the existing firm to act conscionably, and differently from how it would act otherwise. A train company may be the only carrier in a particular station, but if cars are also available in the area, there exists a close substitute to the output good. Natural Monopoly A natural monopoly is a firm with such extreme economies of scale that once it begins...
View Full Document
This note was uploaded on 12/13/2011 for the course ECO 1320 taught by Professor Staff during the Fall '11 term at Texas State.
- Fall '11