Monopoly Is a sole supplier of a good or service Is a sole supplier of a good or service

Free Market Competition

Disadvantages of Monopoly Take away competition and many advantages of free markets disappear. Take away competition and many advantages of free markets disappear. Can you write down a list of disadvantages of monopolies? Leave space for any you might have missed. Can you write down a list of disadvantages of monopolies? Leave space for any you might have missed.

Statutory Monopoly In reality not many businesses are sole suppliers In reality not many businesses are sole suppliers Any firm with over 25% market share may have some monopoly power which they may use to exploit the consumer and restrict competition. Any firm with over 25% market share may have some monopoly power which they may use to exploit the consumer and restrict competition.

Advantages of Monopolies Research and development Research and development Natural monopolies – national pipes, wires and tracks (economies of scale) Natural monopolies – national pipes, wires and tracks (economies of scale) Ability to compete in global markets Ability to compete in global markets

Disadvantages of Monopolies Monopolies may restrict output and raise price (compared to a perfectly competitive industry) Monopolies may restrict output and raise price (compared to a perfectly competitive industry)

Disadvantages Poor service quality Poor service quality Lack of investment Lack of investment Inefficient - not productively or allocatively Inefficient - not productively or allocatively Inefficient – x-inefficient Inefficient – x-inefficient

Barriers to Entry Monopolies exist behind barriers to entry. Monopolies exist behind barriers to entry. These are characteristics of the market that make it difficult or impossible for a new firm to enter. These are characteristics of the market that make it difficult or impossible for a new firm to enter. What barriers to entry may a monopoly be able to ‘hide behind’. What barriers to entry may a monopoly be able to ‘hide behind’.

Barriers to entry Economies of scale Economies of scale Natural monopolies Natural monopolies Legal barriers Legal barriers Brand loyalty Brand loyalty Anti-competitive behaviour Anti-competitive behaviour

Natural Monopoly A natural monopoly is an industry where one single firm cannot fully exploit the economies of scale, given the size of the national market. A natural monopoly is an industry where one single firm cannot fully exploit the economies of scale, given the size of the national market. For this type of monopoly LRACs just continue to fall. For this type of monopoly LRACs just continue to fall. It is economically efficient to have only one firm in this industry. It is economically efficient to have only one firm in this industry. Pipes, wires and tracks. Pipes, wires and tracks.

Homework- Classwor Find a newspaper article about an industry you are interested in Find a newspaper article about an industry you are interested in Companies this applies to include Tesco in the UK or Microsoft. Companies this applies to include Tesco in the UK or Microsoft. Bring it next lesson and be prepared write a 600 – 750 word commentary. Bring it next lesson and be prepared write a 600 – 750 word commentary.