ECN 104 Study Guide - Final Guide: Network Effect, Natural Monopoly, Market Power
19 Jan 2018
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Monopolist: a firm that is the only producer of a good that has no close substitutes. Market power: the ability of a producer to raise prices. Barrier to entry: something that prevents other firms from entering an industry. Crucial in protecting the profits of a monopolist. There are five types of barriers to entry: control over scarce resources or inputs, increasing returns to scale, technological superiority, network externalities, and government-created barriers. Natural monopoly: a monopoly that exists when increasing returns to scaleprovide a large cost advantage to having all output produced by a single firm. Network externality: the increase in the value of a good or service to an individual is greater when a large number of others own or use the same good or service. Patent: a temporary monopoly given by the government to an inventor for the use or sale of an invention.
