ECON 224 Lecture Notes - Lecture 14: Monopolistic Competition, Imperfect Competition, Perfect Competition
Document Summary
8:51 am: characteristics of perfect competition, many buyers and many sellers, the goods offered for sale are largely the same, firms can freely enter or exit the market. A competitive firm has no market power: why monopolies arise, main cause: barriers to entry - other firms cannot enter the market, three sources of barriers to entry: A single firm owns a key resource: i. e. debeer owns most of the world"s diamond mines. The gov"t gives a single firm the exclusive right to produce the good: i. e. copyright laws, patents. Natural monopoly: a single firm can produce the entire market quantity at lower cost than could several firms: i. e. 1000 homes need electricity. Atc is lower if one firm services all 1000 homes instead of two firms servicing 500 homes each: monopoly vs. competition: demand curves, competition: Investment: total spending on goods that will be used in the future to produce more goods.
