ECON 1000 Lecture Notes - Lecture 15: Deadweight Loss, Natural Monopoly, Demand Curve
11 Dec 2016
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Firms with monopolies are price makers not takers. Monopoly: a firm that is the sole seller of a product without close substitutes. Monopolies arise because of barriers to entry. These arise because: monopoly on resources, government create monopolies. Governments give some firms extra rights: natural monopolies. Firms are better at producing things than other firms: monopoly resources. E. g. water with one well in town. E. g. diamonds because de beers owns 80% of the (cid:449)o(cid:396)ld"s dia(cid:373)o(cid:374)ds: government created monopolies. Can come from being a friend/ally to the government. Leads to more research to find alternatives: natural monopolies. Natural monopoly: a monopoly that arises because a single firm can supply a good or service to an entire market or a smaller cost that could two or more firms. Costs are lower if one firm has to pay all the fixed costs. Atc is lower if only one firm is in the market. Usually only achievable in a small market.
