- Slides: 16
Monopolies!!! Are they good for society?
Monopoly Characteristics: n n 1. Number of Firms = 1 2. Variety of Goods = None 3. Barriers to Entry = Complete 4. Control over prices = Complete
A monopoly will only charge a price when MC = MR!!!!
Economies of Scale n n The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
Natural Monopolies n n When one large firm provides all of the output. If a 2 nd firm entered, competition would drive down the price and decrease the quantity. Example: Public Water
Technology and Change n n Both can definitely change the natural monopoly. How did cell phones change the natural monopoly of telephones? ? Be specific.
Government monopoly n n When the governments actions create barriers to entry in markets and create monopolies. A monopoly created by the government!
Technological Monopolies n n n A patent is a way the government can give a company a monopoly. A patent is the exclusive right to a sell a new good or service for a specific time period. Why give a patent?
Why a patent? n Patents guarantee that companies can profit from their research and develop new products for society.
Franchise n A contract issued by a local authority to give a single firm the right to sells its good within an exclusive market. What if SHS had this?
License n When the government grants firms the right to operate a business.
Industrial Organizations n n In professional sports, the government allows team owners to choose new cities for their teams and does not charge them for violating laws that prevent competitors from working together. Case in Point! Browns move to Baltimore