Monopoly Chapter 15 Copyright C 2001 by Harcourt, Inc All rights reserved. Requests for permission to make copies of any part of t work should be mailed to Permissions Department, Harcourt College Publishers 6277 Sea Harbor Drive. Orlando Florida 32887-6777
Monopoly Chapter 15 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777
Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly While a competitive firm is a price taker, a monopoly firm is a price maker
Monopoly OA firm is considered a monopoly if it is the sole seller of its product its product does not have close substitutes H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly uA firm is considered a monopoly if . . . ¼it is the sole seller of its product. ¼its product does not have close substitutes
Why Monopolies arise The fundamental cause of monopoly is barriers to entry. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Why Monopolies Arise The fundamental cause of monopoly is barriers to entry
Why Monopolies Arise Barriers to entry have three sources o Ownership of a key resource o The government gives a single firm the exclusive right to produce some good Costs of production make a single producer more efficient than a large number of producers. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Why Monopolies Arise Barriers to entry have three sources: u Ownership of a key resource. u The government gives a single firm the exclusive right to produce some good. u Costs of production make a single producer more efficient than a large number of producers
Monopoly Resources Although exclusive ownership of a key resource is a potential source of monopoly, in practice monopolies rarely arise for this reason. Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopoly Resources Although exclusive ownership of a key resource is a potential source of monopoly, in practice monopolies rarely arise for this reason
Government-Created Monopolies Governments may restrict entry by giving a single firm the exclusive right to sell a particular good in certain markets. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Government-Created Monopolies Governments may restrict entry by giving a single firm the exclusive right to sell a particular good in certain markets
Government-Created Monopolies Patent and copyright laws are two important examples of how government creates a monopoly to serve the public interest. H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Government-Created Monopolies Patent and copyright laws are two important examples of how government creates a monopoly to serve the public interest
Natural Monopolies An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Natural Monopolies An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
Natural Monopolies A natural monopoly arises when there are economies of scale over the relevant range of output Harcourt, Inc. items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Natural Monopolies A natural monopoly arises when there are economies of scale over the relevant range of output
