MGEA01H3 Chapter Notes - Chapter 13: Monopolistic Competition, Natural Monopoly, Perfect Competition
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MGEA01H3 Full Course Notes
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Four main types of market structure (based on the # of firms in the industry and product differentiation): perfect competition, monopoly, oligopoly, and monopolistic competition. The key difference between a monopoly and a perfectly competitive industry is that a single perfectly competitive firm faces a horizontal demand curve but a monopolist faces a downward- sloping demand curve. Natural monopolies can still cause deadweight losses. To limit these losses, governments sometimes impose public ownership and at other times impose price regulation. Monopolist: a firm that is the only producer of a good with no close substitutes. Market power: the ability of a producer or firm to raise prices. Barrier to entry: something that prevents other firms from entering an industry. This can take the form of: control of natural resources or inputs, increasing returns to scale, technological superiority and government- created barriers including patents and copyrights. Crucial in protecting the profits of a monopolist.