ECO 1104 Chapter Notes - Chapter 15: Deadweight Loss, Marginal Cost, Competitive Equilibrium
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ECO 1104 Full Course Notes
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Monopoly: 2 characteristics, a firm that is the sole seller of a product, the product it sells has no close substitutes, the key difference between monopoly and perfect competition is that: A monopolist has market power the ability to influence the market price of the product it sells. A competitive firm has no market power: why monopolies arise: The main cause of monopolies is barriers to entry. There are 3 types of barriers to entry: a single firm owns a key resource, the government gives a single firm the exclusive right to produce the good, ex. Via patents or copyright laws: natural monopoly a single firm can produce the entire market q at lower cost than could several firms. Cost is the atc of providing electricity per home. It can sell as much as it likes at the market price: it is a price-taker. Its product has many perfect substitutes, so demand is perfectly elastic.