EC120 Chapter Notes - Chapter 15: Costco, Old Age, Price Discrimination
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Monopoly: a firm that is the sole seller of a product without close substitutes: it remains the only seller in its market because other firms cannot enter the market and compete with it. The simplest way for a monopoly to arise is for a single firm to own a key resource. In many cases, monopolies arise because the government has given one person or firm the exclusive right to sell some good or service. Patents and copyright laws are two important examples of creating a monopoly to serve the public interest. A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. Arises when there are economies of scale over the relevant range of output. This is the starting point for evaluating whether monopolies are desirable and what policies the government might pursue in monopoly markets.