chapter 7 section 2 the impact of monopoly. what do most people think whey they hear monopoly?
TRANSCRIPT
Chapter 7Section 2
The Impact of Monopoly
What Do Most People Think What Do Most People Think Whey They Hear Monopoly? Whey They Hear Monopoly?
Characteristics of a Characteristics of a MonopolyMonopoly
A monopoly occurs when there is only one seller of a product that has no close substitutes. A pure monopoly is very rare, but some businesses come close. Cartels are formal organizations of sellers and producers that work in agreement to set prices and limit production
Historical Monopolies
Three Characteristics of a Three Characteristics of a MonopolyMonopoly
Only one seller – a single business controls the supply of a product that has no close substitutes. Examples: De Beers diamonds
Restricted, regulated market – Government regulations sometimes allow a single firm to control a market. Examples: Local utilities
Control of Prices – They can set the prices because there are no close substitutes and
they have no competition.
Types of MonopoliesTypes of Monopolies
Natural monopoly – the cost of production is lowest with only one producer.
Government monopoly – the government either owns or runs the business or allows only one producer.
Technological monopoly – a firm controls a manufacturing method, invention, or type of technology.
Geographic monopoly – there are no other producers or sellers within a certain region.
Natural MonopoliesLocal public utilities fall within this category. It would be a waste of community resources to have several competing business trying to distribute water. A single supplier is more efficient to produce utilities and not worry about competition.
Government Monopolies
The US Postal Service is an example of government monopoly.Private firms would not want be attracted to this venture, due to insufficient profit opportunities.
Technological MonopoliesTechnological Monopolies
Sometimes firms create a new technology that they do not want copied or duplicated.The government allows this by issuing patents, this gives the inventor rights to the invention or process for a certain number of years.
Geographic MonopoliesPro sports teams are an example of a geographic monopoly. The leagues they play in restrict the amount of teams and their location.Physical isolation is another example. Gas stations in rural areas, where the next closest one is 50 miles away can charge much higher prices at the pump.