ECON 1000 Lecture Notes - Market Power, Natural Monopoly, Perfect Competition
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ECON 1000 Full Course Notes
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Chapter 12: monopoly: that produces a good or service for which no close substitute exists. In which there is one supplier that is protected from competition by a barrier preventing the entry of new firms. If a good has a close substitute, even if it is produced by only one firm, that firm effectively faces competition from the producers of the substitute. A monopoly sells a good that has no close substitutes: barriers to entry: a constraint that protects a firm from potential competitors. Three types of barriers to entry are: Natural: a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost. Ownership: occurs if one firm owns a significant portion of a key resource. Legal: a market in which competition and entry are restricted by the granting of a: public franchise (like the u. s.