This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: been working with), then it is likely that a natural monopoly will form. Figure %: Natural Monopoly Why is this true? Let's say that in the market for computers, Eliot Computer Lab ("ECL") gets a head start on production, and has already made 1000 units before its competitors get started. At that point, ELC has a much lower average cost than the new firms, and therefore has a significant advantage over its competitors, since it can charge lower prices and make more profits. If it ever feels threatened by new firms, it can increase production and lower the price even more, so that the new firms cannot compete, since they are still further back on the cost curve. In such a case, ECL would have a natural monopoly in the computer market, and other firms would exit the market....
View Full Document
This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08