ECON 1B03 Lecture Notes - Lecture 29: Natural Monopoly, Demand Curve, Perfect Competition

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Basic reason for monopoly is barriers to entry. There are 4 sources of these barriers: a single firm owns a key resource that no other firm can access/has a close substitute for. In reality, this is rare b/c firms are big and international in scope: government gives 1 firm exclusive right to produce and sell some good. Government can give a firm sole rights to sell in a particular market, like cable tv companies: an industry is a natural monopoly . A single firm can supply a good/service to an entire market at a lower cost than could. A natural monopoly arises when there are increasing returns to scale over a relevant range of output. Firm operates on downward sloping part of its average total cost curve, so it can increase output and still lower its average costs: monopoly by good management. Some firms conduct their affairs with aim of keeping out/driving out competition.

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