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2013-07-22 10:33:27
Chapter 24 Monopolies

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  1. Monopolist
    The single supplier of a good or service for which there is no close substitute. The monopolist therefore constitutes it's entire industry. (Must be Barriers to entry)
  2. Barriers to Entry
    Barriers to entry are restrictions on who can start a business or who can stay in a business.
  3. Ownership of Resources Without Close Substitutes

    (Barriers to Entry)
    no monopoly acting without government support has beenable to prevent entry into the industry unless that monopoly has had the control ofsome essential natural resource
  4. Natural monopoly
    A monopoly that arises from the peculiar production characteristics in an industry. It usually arises when there are large economies of scale relative to the industry’s demand such that one firm can produce at a lower average cost than can be achieved by multiple firms.
  5. Economies of Scale

    (Barriers to Entry)
    When economies of scale exist, larger firms (with larger output) have an advantage in that they have lower costs that enable them to charge lower prices and thereby drive smaller firms out of business.
  6. Legal or Governmental Restrictions

    (Barriers to Entry)
    Governments and legislatures can also erect barriers to entry. These include licenses,franchises, patents, tariffs, and specific regulations that tend to limit entry.
  7. Tariffs
    Taxes on imported goods.
  8. Demand Curve a Monopolist Faces
    The monopolist faces the industry demand curve because the monopolist is the entire industry.
  9. pure monopolist
    A pure monopolist is the sole supplier of one product.
  10. Price searcher
    A firm that must determine the price-output combination that maximizes profit because it faces a downward-sloping demand curve.
  11. Price discrimination
    Selling a given product at more than one price, with the price difference being unrelated to differences in marginal cost.
  12. Price differentiation
    Establishing different prices for similar products to reflect differences in marginal cost in providing those commodities to different groups of buyers.