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Lecture 13

ECON 101 Lecture 13: ECON 101 - Chapter 13 Notes

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ECON 101
Noriko Ozawa

Sunday, November 27, 2016 ECON 101 Chapter 13: Monopoly and Antitrust Policy 13.1 Any Firm Ever Really a Monopoly? Three Characteristics: 1. Only one seller of a good or service. 2. Unique product with no close substitutes. 3. Barriers to entry is high enough to prevent new rms from entering the market. Difculty: Whether a rm has a monopoly depends on how to dene the market. Alternative denition: A rm has a monopoly if it can ignore the actions of all other rms. 13.2 Where Do Monopolies Come From? Four Sources of Entry Barriers: 1. A government blocks the entry of more than one rm into a market. 2. One rm has control of a key resource necessary to produce a good. 3. There are important network externalities in supplying the good or service. 4. Economies of scale are so large that one rm has a natural monopoly. 1. Government Action Blocks Entry Two common actions: 1. Patents and Copyrights Patents: The exclusive right to a product for a period of 20 years from the date the patent is led with the government. Copyrights: A governmentgranted exclusive right to produce and sell a creation. 2. Public Franchises A government designation that a rm is the only legal provider of a good or service; or A government creates a crown corporation to provide services to consumers 1
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