Chapter 14

Chapter 14 - Chapter 14: Monopoly and Antitrust Policy Even...

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Chapter 14: Monopoly and Antitrust Policy Even though perfectly competitive markets are rare, this market model provides a benchmark for how a firm acts in the most competitive situation possible: when it is in an industry with many firms that all supply the same product They provide a benchmark for the other extreme, where a firm is the only one in its market and, therefore, faces no competition from other firms supplying its product Collude means not to compete Is Any Firm Ever Really a Monopoly? Monopoly- a firm that is the only seller of a good or service that does not have a close substitute A narrow definition of monopoly that some economists use is that a firm has a monopoly if it can ignore the actions of al other firms Other firms must not be producing close substitutes if the monopolist can ignore the other firms’ prices Where Do Monopolies Come From? Monopolies don’t face competition Barriers to entry may be high enough to keep out competing firms for four main reasons: 1) A government blocks the entry of more than one firm into a market 2) one firm has control of a key resource necessary to produce a good 3) there are important network externalities in supplying the good or service 4) economies of scale are so large that one firm has a natural monopoly Entry Blocked by Government Action Government take action to block entry into a market By granting a patent or copyright to an individual or a firm, giving it the exclusive right to produce a product By granting a firm a public franchise, making it the exclusive legal provider of a good or service Patents and Copyrights
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This note was uploaded on 02/21/2012 for the course EC 101 taught by Professor Idson during the Fall '08 term at BU.

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Chapter 14 - Chapter 14: Monopoly and Antitrust Policy Even...

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