Monopolies Definition Causes Antitrust Laws Chapter 15 4

Monopolies Definition, Causes & Antitrust Laws Chapter 15

4 Market Structures Lowest Price Highest Quantity No DWL Perfect Competition Most competitive Highest Price Lowest Quantity Largest DWL Monopolistic Competition Oligopoly Monopoly Least competitive

Monopoly 5 Market Characteristics Perfect Competition # Sellers • One Seller Unlimited Product • Unique Product—no substitute Homogenous Entry/Exit • Difficult/Impossible Free, quick Information • Limited Information Perfect Info. Price Control • Great deal of price control— Price Setter No Price Control (Exactly Same) (price taker)

Barriers to Entry • Primary cause of a monopoly industry is Barriers to Entry – Barriers make it difficult to “enter the market” • 3 Primary Barriers to Entry: 1) Ownership of a key resource 2) Government gives one firm the exclusive right to produce 3) Costs of production make a single producer more efficient

Natural Monopolies • A Natural Monopoly is when a single firm can supply a good/service at a lower cost – They develop in industries with large economies of scale Examples: Qty Produced => ATC Utilities: Electricity, Gas & Water

Government Regulation • Antitrust laws (1890) - a collection of statutes aimed at curbing monopoly power by: – Breaking up companies – Preventing mergers – Regulating pricing Perfect Together?

Proposed Merger in 2014 wanted to buy Would 2 companies have been enough competition?

Final decision: Government denied the merger of ATT with T-Mobile

Anti-trust law video 14 minutes