Chapter 22 Pure Monopoly Pure Monopoly 1 Single

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Chapter 22 Pure Monopoly

Chapter 22 Pure Monopoly

Pure Monopoly • 1. Single seller- single producer or supplier of a good/service •

Pure Monopoly • 1. Single seller- single producer or supplier of a good/service • 2. No close substitutes • 3. Price Maker- controls price by controlling supply • 4. Blocked Entry-economic, technological, legal • 5. Non-price Competition- Often PR advertising (standardized)

Monopoly Examples • Pure monopolies are relatively rare • Government owned/regulated public utilities- water

Monopoly Examples • Pure monopolies are relatively rare • Government owned/regulated public utilities- water company, natural gas, electric companies, cable

Near Monopolies • A single firm has the bulk of sales in a specific

Near Monopolies • A single firm has the bulk of sales in a specific market • Ex- Intel provides 80% of microprocessors • De. Beers supplies 55% of uncut diamonds • Professional sports teams (minus NY, LA)

Some Competition • There is almost always some form of competition, but substitutes are

Some Competition • There is almost always some form of competition, but substitutes are usually more expensive or less appealing

Barriers to Entry • Strong barriers to entry effectively block all potential competition •

Barriers to Entry • Strong barriers to entry effectively block all potential competition • 1. Economies of scale- modern technology in some industries allow only a few large firms or one firm to achieve low ATC • **it is too costly for firms to enter and compete • Ex- automobiles, commercial airlines, steel

Barriers to Entry Cont’d • 2. Legal Barriers to Entry • A. Patents •

Barriers to Entry Cont’d • 2. Legal Barriers to Entry • A. Patents • B. Licenses

Patents • Exclusive rights of an inventor to use, or to allow another to

Patents • Exclusive rights of an inventor to use, or to allow another to use, his/her invention • -last 20 years from the time of application • -R and D is what leads to most patentable inventions and products • Ex- IBM, Pfizer, GE, Du. Pont

Licenses • The government can also limit entry into an industry through licensing •

Licenses • The government can also limit entry into an industry through licensing • Ex- FCC only licenses certain radio stations, cities only allow certain cab companies to operate, state liquor agencies, and state lotto

Barriers to Entry Cont’d • 3. Ownership or Control of Essential Resources- use private

Barriers to Entry Cont’d • 3. Ownership or Control of Essential Resources- use private property as an obstacle to potential rivals • Ex- International Nickel Co of Canada once controlled 90% of the world’s known nickel deposits • -sand or gravel • -professional sports stadiums/arenas

Barriers to Entry Cont’d • 4. Pricing and other strategic barriers • -confronted with

Barriers to Entry Cont’d • 4. Pricing and other strategic barriers • -confronted with a new firm, a monopolist might slash prices or beef up advertising • Ex- Microsoft charged more for operating systems to companies that used Netscape

PURE MONOPOLY CHARACTERISTICS OF PURE MONOPOLY Single sellerPURE MONOPOLY CHARACTERISTICS OF PURE MONOPOLY Single seller
ECON 202 Chapter 22 Pure Monopoly Pure MonopolyECON 202 Chapter 22 Pure Monopoly Pure Monopoly
Chapter 24 Pure Monopoly Pure Monopoly I INTRODUCTIONChapter 24 Pure Monopoly Pure Monopoly I INTRODUCTION
Chapter 12 Pure Monopoly Introduction to Pure MonopolyChapter 12 Pure Monopoly Introduction to Pure Monopoly
Monopoly Outline Pure monopoly Barriers to entry MonopolyMonopoly Outline Pure monopoly Barriers to entry Monopoly
Monopoly Outline Pure monopoly Barriers to entry MonopolyMonopoly Outline Pure monopoly Barriers to entry Monopoly
Monopoly Outline Pure monopoly Barriers to entry MonopolyMonopoly Outline Pure monopoly Barriers to entry Monopoly
Monopoly Characteristics of a Monopoly Pure Monopoly existsMonopoly Characteristics of a Monopoly Pure Monopoly exists
Monopoly Pure Monopoly exists when a single firmMonopoly Pure Monopoly exists when a single firm
CHAPTER 14 Monopoly Monopoly A monopoly monopolist meansCHAPTER 14 Monopoly Monopoly A monopoly monopolist means