ECO101H1 Chapter Notes - Chapter 15: Natural Monopoly, Substitute Good, Marginal Revenue

• School: UTSG
• Department: Economics
• Course: ECO101H1
• Professor: James Pesando

Document Summary

Monopoly a firm that is the sole seller of a product without close substitutes. Natural monopoly a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost that could 2 or more firms. Price discrimination the business practice of selling the same good at different prices to different customers. The fundamental cause of monopoly is barriers to entry. Barriers to entry have 3 main sources: 1. Monopoly resources: a key resource is owned by a single firm: 2. Government created monopolies: the government gives a single firm the exclusive right to produce some good or service: 3. Natural monopolies: a single firm can produce output at a lower cost than can a large number of producers. Monopoly resources: the price of a good is equal to the marginal cost of producing an extra unit. Natural monopolies: arises when there are economies of scale over the relevant range of output.