EC 110 Lecture Notes - Lecture 14: United States Postal Service, Sherman Antitrust Act, Clayton Antitrust Act

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Monopoly: a firm that is the sole seller of a product w/o close substitutes. The fundamental cause of a monopoly is barriers to enter (a monopoly remains the only seller bc other firms cannot enter the market & compete) The simplest way to create a monopoly is to own a key resource: monopolies rarely arise for this reason, economies are large & resources are owned by many people. Occur because government gives a person or firm the exclusive right to sell some good or service ex) author having copyrights to his/her book pharmaceutical company discovering a new drug. Natural monopoly: monopoly that arises because a single firm can supply a good/service to an entire market at a smaller cost than two or more firms could ex) distribution of water, an uncongested bridge. A natural monopoly occurs when a firm"s atc continuously declines (economies of scale)

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