ECN 104 Lecture Notes - Lecture 9: Monopoly Price, Marginal Revenue, Natural Monopoly
15 Jan 2017
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Blocked entry: strong barriers to entry block potential competition. Nonprice competition: mostly pr or advertising products. Public utility companies: natural gas, electric, water. The factors that keep firms from entering an industry: economies of scale, legal barriers: patent and licenses, ownership of essential resources, pricing. This occurs where the lowest unit costs and therefore lowest unit prices for consumers depend on the existence of a small number of large firms. Legal barriers to entry into a monopolistic industry also exist in the form of patents and licenses. Ownership or control of essential resources is another barrier to entry. Monopolists may use pricing or other strategic barriers such a selective price cutting and advertising. A declining long run average total cost over a wide range of output quantities indicates a extensive economic of scale. It is cheaper to produce more for monopolies. Demand curve is the market demand curve: downsloping demand curve.
