Monopolies

Consumers are exploited as super normal profits are earned
Barriers to entry
1. High start up costs
2. Government regulation
  Annotations:
  - Although governments normally try to prevent the growth of monopolies, in certain cases they create or preserve them. An example is the Irish mail company, "An Post". The Irish government prevents the entry of other firms into the mail industry in order to ensure uniform prices throughout the country, whether one lives in an isolated rural area or an urban centre.
3. Brand loyalty
The long run and short run equilibriums of a monopoly are identical
1. Barriers to entry prevent new firms entering market in pursuit of super normal profits
  1. The monopolist continues to make supernormal profit and the consumers have no alternatives
Wide agreement among economists that monopolies are bad for the economy and should be prevented
1. Governments often introduce regulations to control the growth of monopolies
2. Monopolies are inefficient, with average cost not at the minimum level, and so waste resources
Like all market types, we make assumptions about the existence of monopolies
1. There is only one firm in the industry
2. The firm aims to make maximum profit
  Annotations:
  - i.e, the firm produces the quantity where marginal cost equals marginal revenue
3. The monopolist can control either the price charged or the quantity sold, but not both

Resource summary

	Created by daniel.examtime almost 11 years ago