ECON 2010U Lecture Notes - Lecture 11: Natural Monopoly, Economic Surplus, Rede Ferroviária Nacional
Document Summary
That produces a good or service for which no close substitute exists. In which there is one supplier that is protected from competition by a barrier preventing the entry of new firms. If a good has a close substitute, even if it is produced by only one firm, that firm effectively faces competition from the producers of the substitute. A monopoly sells a good that has no close substitutes. A constraint that protects a firm from potential competitors is called a barrier to entry. A natural monopoly is a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost. 4 million units of output at 5 cents per unit. 4 million units 2 units each at 10 cents per unit. An ownership barrier to entry occurs if one firm owns a significant portion of a key resource. During the last century, de beers owned 90 percent of the world"s diamonds.
