EC 201 Lecture Notes - Lecture 12: Natural Monopoly, Rent-Seeking, Market Power
Document Summary
Outright, patent, copyright, licenses- given by government. Barriers is made natural due to atributes of the irm-natural monopoly. Natural monopolist dissuades entry by reducing price. The cost advantage that irms obtain due to size, output scale of operaion any potenial entrant faces much higher costs than exising irm. If a irm has economy of scale, the incumbent irm has signiicant cost advantage over potenial rivals. Natural monopolies occurs whenever the average costs of producion are declining. One irm produces he enire market demand. With a natural monopoly, more irms in the industry would not make output more eicient. There can be sill compleion for the market. If demand grows, there may be room for compeitors. A natural monopolist dissuades entry by reducing price so that other irms cannot compete. In natural monopoly, ac curve is downward sloping in a relevant range of output. Natural monopolist doesn"t like to share proit with others. Natura monopolist focuses more o market power.
