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economics - The first market structure to be examined is...

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The first market structure to be examined is the monopoly. This is probably the most simple of the three to understand. In the monopoly, there is only one supplier of a product in a market and there are no easy substitutes. Here is an example. A neighborhood is developed from farmland in a rural area. No cable lines have been laid to the area at this time. The cost to do so is relatively high, so the only option those residents have for "enhanced" TV services is a satellite dish. In this scenario, customers would pay a premium for the service to the monopoly, simply because they have no alternative. Unfortunately for the dish providers, ultimately the cable company determines that the cost of laying the line is an investment on future revenues and goes about laying the cable line and encroaching on the market. This turns the market from a monopoly to an oligopoly for this individual market. Governments can also create monopolies
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through legislation. Most states do this for drivers licensing (which is probably why customers tolerate such long lines!) and some states do it for the sales of liquor, where the only place you can purchase it is through a government owned store. Prices can be optimized in either scenario because customers have nowhere else to go. However, in government monopolies, there's generally political pressure to keep prices low from the populace. One recent example was when casinos entered Pennsylvania and were only initially allowed permits for slot machines. When the casinos wanted to add table games, the state of Pennsylvania had a great deal of flexibility in setting the price for those permits because without them, the casinos had no other options.
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