Class Notes (810,016)
Canada (493,915)
Economics (969)
ECON 101 (318)

Chapter 13 - Monopoly.docx

5 Pages
Unlock Document

University of Waterloo
ECON 101
Corey Van De Waal

Chapter 13 Monopoly Monopoly and How It Arises A monopoly is a marketThat produces a good where there are no close substituteWhere there is one supplier that is protected from competition by a barrier preventing the entry of new firms A monopoly has two key featuresNo close substitutes o The firm effectively faces competition from the producers of the substitute if a good has a good substitute even if it is produced by only one firm o A monopoly sells a good that has no close substitutesBarriers to entry o A constraint that protects a firm from potential competitors o There are three types of barriers to entryNatural barriersCreate natural monopoly which is a market where economies of scale allow one firm to supply the entire market at the lowest possible cost o Economies of scale are so powerful that they are still being achieved even when the entire market demand is met o LRAC curve still slopes downward to meet the demand curveOwnership barriersWhen one firm owns a significant portion of a key resourceLegal barriersCreate legal monopoly which is a market where competition and entry are restricted by the granting of a o Public franchiseo Government license o Patent or copyright Monopoly PriceSetting Strategies A monopoly firm must choose the appropriate price to determine the quantity it sells There are two types of monopoly pricesetting strategiesSingleprice monopoly is a firm that has to sell each units for the same price to all its customersPrice discrimination is when a firm sells different units of their goodservice at different prices Many firms price discriminate but not all of them are monopoly firms A SinglePrice Monopolys Output and Price Decision Price and Marginal Revenue A monopoly is a price setter not a price taker like firms in perfect competition because the market demand is entirely made up of the demand for the monopolys output
More Less

Related notes for ECON 101

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.