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Y2 10) Barriers to Entry and Exit (Sources of Monopoly Power)
Y2 10) Barriers to Entry and Exit (Sources of Monopoly Power)
Y2 10) Barriers to Entry and Exit (Sources of Monopoly Power)
10.1 The Nature of Monopoly – Principles of Economics [1]
– Define monopoly and the relationship between price setting and monopoly power.. – List and explain the sources of monopoly power and how they can change over time.
There are no close substitutes for the good or service a monopoly produces. Not only does a monopoly firm have the market to itself, but it also need not worry about other firms entering
A monopoly does not take the market price as given; it determines its own price. It selects from its demand curve the price that corresponds to the quantity the firm has chosen to produce in order to earn the maximum profit possible
Sources of Monopoly [2]
A monopolyA firm that faces a downward sloping demand and has a choice about what price to charge. is a firm that faces a downward sloping demand and has a choice about what price to charge—without fearing of chasing all of its customers away to rivals.
Microsoft has a great deal of market power, but a small percentage of personal computer users choose Apple or Linux operating systems. However, many firms have market powerThe ability to increase their price above marginal cost and sustain sales for a long period of time
Both terms require downward sloping demand and usually some notion of sustainability of sales. Some distinguish the terms by whether they are “large” or not; others by how long the price increase can be sustained
Definition & Examples [3]
Have you ever played the board game Monopoly? If so, then you know the strategy for winning the game — and becoming the monopolist — is to control the entire economy. But this strategy sometimes exists outside of board games as well
For example, let’s say Comcast was the only cable television provider in your area. If you wanted to hook up your cable, you would have no choice but to go to Comcast
In rare cases, monopolies are allowed to operate by the federal government, but as a general rule they are illegal under United States antitrust law and are highly discouraged. The United States has a general philosophy of our economy being a free marketplace with open and fair competition for anyone to enter and operate.
Sources of Monopoly Power [4]
Monopoly power is influenced by the following factors:. – The larger and more expensive the barriers to entry the greater the monopoly power
– The greater the advertising spend and more recognisable the brand name the greater the monopoly power. – The larger the degree of product differentiation the greater the extent of the monopoly power
Where total revenue exceeds total costs the firm is able to make supernormal profits
Sources of Monopoly Power [5]
Monopolies obtain their market power from barriers to entrycircumstances that stop or greatly impede a potential competitor’s capacity to engage in a market. There are three major kinds of barriers to entry: economic, legal, and deliberate.
Reducing unit prices for larger volumes of production. Reducing prices coupled with large initial prices, if for example, the industry is big sufficient to support one company of at least efficient scale then other companies entering the industry will run at a size that is under MES, and so can’t make at a moderate price that is competitive with the dominant company
A monopoly sells a good for which there is no close substitute. The absence of alternatives makes the demand for that good relevantly inelastic, enabling monopoly to extract positive profits
The main sources of monopoly power are ___________. [6]
The main sources of monopoly power are ___________.. Two main sources of monopoly power are control of a key resource or economies of scale arising over a large range of ouptut.
A firm encountering economies of scale over some range of output will have a
Sources of Monopoly [7]
A monopolyA firm that faces a downward sloping demand and has a choice about what price to charge. is a firm that faces a downward sloping demand and has a choice about what price to charge—without fearing of chasing all of its customers away to rivals.
Microsoft has a great deal of market power, but a small percentage of personal computer users choose Apple or Linux operating systems. However, many firms have market powerThe ability to increase their price above marginal cost and sustain sales for a long period of time
Both terms require downward sloping demand and usually some notion of sustainability of sales. Some distinguish the terms by whether they are “large” or not; others by how long the price increase can be sustained
What are the 3 sources of monopoly power? [8]
What are three main sources of monopoly?There are three basic sources of monopoly: one created by government, like patents; a large economy of scale or a network externality; and control of an essential, or a sufficiently valuable, input to the production process.. What are the sources of monopoly power?The sources of monopoly power include economies of scale, locational advantages, high sunk costs associated with entry, restricted ownership of key inputs, and government restrictions, such as exclusive franchises, licensing and certification requirements, and patents.
What is an example of power monopoly?An unregulated monopoly has market power and can influence prices. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company
Y2 10) Barriers to Entry and Exit (Sources of Monopoly Power). What is monopoly power also known as?3.1 Market Power Introduction
One of the sources of monopoly power for a monopoly may be A) government policies B) free entry and exit C) diseconomies of scale D) differentiated products [9]
One of the sources of monopoly power for a monopoly may be A) government policies B) free entry…. One of the sources of monopoly power for a monopoly may be
Commodities in this market structure have no close substitutes. A monopoly is a market where the firm has full control of the market prices; hence, it has market power.
Government policies provide monopoly firms with market power. Our experts can answer your tough homework and study questions.Ask a question Ask a question
Sources of Monopoly Power – UNISA [10]
Why are some markets dominated by single firms? What are the sources of monopoly power? Economists have identified a number of conditions that, individually or in combination, can lead to domination of a market by a single firm and create barriers that prevent the entry of new firms.. Barriers to entry are characteristics of a particular market that block new firms from entering it
These barriers may be interrelated, making entry that much more formidable. Although these barriers might allow one firm to gain and hold monopoly control over a market, there are often forces at work that can erode this control.
If long-run average cost declines as the level of production increases, a firm is said to experience economies of scale.. A firm that confronts economies of scale over the entire range of outputs demanded in its industry is a natural monopoly
Economics Paper 2, WASSCE (SC), 2017 [11]
(c) Explain the following sources of monopoly power:. Candidates were required to state two features each of perfect competition and monopolistic competition in the (a) part, the meaning of price taker and price maker and to explain sources of monopoly power in the (b) and the (c) part of the question
Candidates were expected to provide the following answer to score maximum marks in this question.. (i) Large numbers of buyers and sellers such that no single seller or buyer can influence the
(iii) Common price rules the market because price is fixed by the forces of demand and supply.. (iv) Homogenous product (the same product) is sold by all sellers in the market.
Chapter 1: The sources of monopoly power in the history of economic thought [12]
The first chapter sets the research field and explains the motivations. It shows that there is a gap in the secondary literature on the sources of monopoly power before the 1930s
This chapter provides the reasons for the choice of four Italian marginalists (Barone, De Viti de Marco, Pantaleoni, and Pareto), the main one of which can be traced to their presence in the secondary literature on competition and on non-competitive markets.. When was the notion of market power defined? And how has it been explained in the history of economic thought? In this chapter, we distinguish four different fields of enquiry in which to seek a history of ideas on the causes of market power
This chapter is of a historiographical character and places this book within the existing panorama of the secondary literature. Moreover, it has been written in the conviction that in the study of economic thought one cannot restrict oneself to simply narrating a history, one must also have some very good reasons for doing so.
Monopoly Power: Definition, Examples & Characteristics [13]
‘Control it all’ is one of the official slogans of the Monopoly board game. Similar to the board game, real monopolies can in fact ‘control it all’ when it comes to prices or output quantities
A pure monopoly is a market owned by only one firm.…. Explore our app and discover over 50 million learning materials for free.
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Solved: Which of the following is a source of monopoly power? (Check all corr [14]
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Monopoly power [15]
While there only a few cases of pure monopoly, monopoly ‘power’ is much more widespread, and can exist even when there is more than one supplier – such in markets with only two firms, called a duopoly, and a few firms, an oligopoly.. According to the 1998 Competition Act, abuse of dominant power means that a firm can ‘behave independently of competitive pressures’
Monopolies are formed under certain conditions, including:. – When a firm has exclusive ownership or use of a scarce resource, such as British Telecom who owns the telephone cabling running into the majority of UK homes and businesses.
– When firms have patents or copyright giving them exclusive rights to sell a product or protect their intellectual property, such as Microsoft’s ‘Windows’ brand name and software contents are protected from unauthorised use.. – When firms merge to given them a dominant position in a market.
Chapter 3. Monopoly and Market Power – The Economics of Food and Agricultural Markets [16]
This chapter will explore firms that have market power, or the ability to set the price of the good that they produce.. Market Power = Ability of a firm to set the price of a good
An industry is defined as a group of firms that produce the same good.. Monopoly = A single firm in an industry with no close substitutes.
McDonalds is the only provider of Big Macs, yet it is not a monopoly because there are many close substitutes available: Burger King Whoppers, for example.. A competitive firm is a “price taker.” Thus, a competitive firm has no ability to change the price of a good
Wikipedia [17]
This article needs additional citations for verification. A monopoly (from Greek μόνος, mónos, ‘single, alone’ and πωλεῖν, pōleîn, ‘to sell’), as described by Irving Fisher, is a market with the “absence of competition”, creating a situation where a specific person or enterprise is the only supplier of a particular thing
In law, a monopoly is a business entity that has significant market power, that is, the power to charge overly high prices, which is associated with a decrease in social surplus.[3] Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[3]
Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations in which one or a few entities have market power and therefore interact with their customers (monopoly or oligopoly), or suppliers (monopsony) in ways that distort the market.[citation needed]
The Sources of Monopoly Power Before Bain (1956) [18]
48 Pages Posted: 6 Jul 2009 Last revised: 26 Aug 2009. The purpose of this article is to show that there is a gap in the literature on the sources of monopoly power
It finds that there are good reasons to investigate the sources of market power in the Italian marginalist thought. entry is not considered before 1950s only in analytical models, while in non formalized theory there is a lot on this notion; 3
Italian marginalists used a kind of theory of strategic competition, which was an adaptation of the classical theory of competition; 5. competition policies were requested in 19th century not only in the U.S.
Get 5 free video unlocks on our app with code GOMOBILE. Which of the following is a source of market power for a monopolist?
Which of the following is NOT a barrier to entry that would allow a monopolist to keep potential competitors out of its market? Significant economies of scale exist. The firm has government authorization to be a monopoly
Which of the following is associated with a high degree of monopoly power? A. Significant price competition among firms in the market D
Monopoly Power: Meaning, Sources, and Effects — Penpoin. [20]
What’s it: Monopoly power refers to a firm’s ability to influence market prices. It is weak when the market is made up of many players, and products are relatively homogeneous
And, the firm has absolute market power if it is the only producer in the market (monopoly).. Monopoly power is synonymous with market power and is often used interchangeably in some literature.
Monopoly power is often contrasted with a price taker. When a company is a price taker, it has no control over their products’ selling price, let alone influence the market price
Sources
- https://open.lib.umn.edu/principleseconomics/chapter/10-1-the-nature-of-monopoly/#:~:text=The%20sources%20of%20monopoly%20power%20include%20economies%20of%20scale%2C%20locational,and%20certification%20requirements%2C%20and%20patents.
- https://saylordotorg.github.io/text_introduction-to-economic-analysis/s16-01-sources-of-monopoly.html#:~:text=There%20are%20three%20basic%20sources%20of%20monopoly%3A%20one%20created%20by,input%20to%20the%20production%20process.
- https://study.com/learn/lesson/monopoly-power-overview-abuse-laws.html#:~:text=In%20the%20business%20world%2C%20monopoly,but%20to%20go%20to%20Comcast.
- https://revisionworld.com/a2-level-level-revision/economics-level-revision/business-economics-distribution-income/concentrated-markets/sources-monopoly-power
- https://www.longdom.org/articles/sources-of-monopoly-power-87461.html
- https://byjus.com/question-answer/the-main-sources-of-monopoly-power-are-control-of-a-key-resource-economies-of-scale/
- https://saylordotorg.github.io/text_introduction-to-economic-analysis/s16-01-sources-of-monopoly.html
- https://osgamers.com/frequently-asked-questions/what-are-the-3-sources-of-monopoly-power
- https://homework.study.com/explanation/one-of-the-sources-of-monopoly-power-for-a-monopoly-may-be-a-government-policies-b-free-entry-and-exit-c-diseconomies-of-scale-d-differentiated-products.html
- https://econdev.co.za/lesson/overview-imperfect-competition/monopoly/sources-of-monopoly-power/
- https://www.waeconline.org.ng/e-learning/Economics/econs226mq5.html
- https://www.elgaronline.com/display/9781781003701/08_chapter1.xhtml
- https://www.studysmarter.co.uk/explanations/microeconomics/imperfect-competition/monopoly-power/
- https://tutorbin.com/questions-and-answers/which-of-the-following-is-a-source-of-monopoly-power-check-all-correct
- https://www.economicsonline.co.uk/market_failures/monopoly_power.html/
- https://kstatelibraries.pressbooks.pub/economicsoffoodandag/chapter/__unknown__-2/
- https://en.wikipedia.org/wiki/Monopoly
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1430322
- https://www.numerade.com/ask/question/which-of-the-following-is-a-source-of-market-power-for-a-monopolist-a-firm-may-have-a-patent-or-copyright-a-firmmay-control-critical-resources-a-firm-may-have-a-government-authorized-franchi-80278/
- https://penpoin.com/monopoly-power/
