1. Parent’s evening appointments
For tonight!

2. Monopolies & Market Structure
Intro to Monopolies
Monopolies & Market Structure
Mrs Gordon's notes

3. Intro to Monopolies
Market Structure
Market structure – identifies how a market is made up in terms of:
The number of firms in the industry
The nature of the product produced
The degree of power each firm has
The degree to which the firm can influence price
Profit levels
Firms’ behaviour – pricing strategies, non-price competition, output levels
The extent of barriers to entry
The impact on efficiency
Mrs Gordon's notes

4. Market Structure More competitive (fewer imperfections)
Intro to Monopolies
Market Structure
Perfect
Competition
Pure Monopoly
More competitive (fewer imperfections)
Mrs Gordon's notes

5. Less competitive (greater degree of imperfection)
Intro to Monopolies
Market Structure
Perfect
Competition
Pure Monopoly
Less competitive (greater degree of imperfection)
Mrs Gordon's notes

6. Monopolistic Competition
Intro to Monopolies
Market Structure
Pure Monopoly
Perfect
Competition
Monopolistic Competition
Oligopoly
Duopoly
Monopoly
The further right on the scale, the greater the degree of monopoly power exercised by the firm.
Mrs Gordon's notes

7. Market Structure Importance:
Intro to Monopolies
Market Structure
Importance:
Degree of competition affects the consumer – will it benefit the consumer or not?
Impacts on the performance and behaviour of the company/companies involved
Mrs Gordon's notes

8. Market Structure Models – a word of warning!
Intro to Monopolies
Market Structure
Models – a word of warning!
Market structure deals with a number of economic ‘models’
These models are a representation of reality to help us to understand what may be happening in real life
There are extremes to the model that are unlikely to occur in reality
They still have value as they enable us to draw comparisons and contrasts with what is observed in reality
Models help therefore in analysing and evaluating – they offer a benchmark
Mrs Gordon's notes

9. So now can you predict a monopoly’s characteristics
Intro to Monopolies
Market Structure
So now can you predict a monopoly’s characteristics
Characteristics of each model:
Number and size of firms that make up the industry
Control over price or output
Freedom of entry and exit from the industry
Nature of the product – degree of homogeneity (similarity) of the products in the industry (extent to which products can be regarded as substitutes for each other)
Diagrammatic representation – the shape of the demand curve, etc.
One
– exceeds
25% market share
Price maker
Difficult
Price inelastic
Few substitutes
Mrs Gordon's notes

10. Monopoly….

11. Pure Monopoly assumptions
Single seller of good/service
No substitutes for the good
There are barriers to entry into the market

12. Intro to Monopolies
Monopoly
Need to know this
Pure monopoly – where only one producer exists in the industry. In reality, rarely exists – always some form of substitute available!
Monopoly exists therefore where one firm dominates the market
Firms may be investigated for examples of monopoly power when market share exceeds 25%
Use term ‘monopoly power’ with care!
Mrs Gordon's notes

13. Can you remember the industry’s on a monopoly board?
Trains
Water
Electricity
Taxman
Bank
Jail
Car Parking
Which of these industries do you think are MONOPOLIES?

14. Intro to Monopolies
Monopoly power
Need to know this
Monopoly power – refers to cases where firms influence the market in some way through their behaviour – determined by the degree of concentration in the industry
Influencing prices
Influencing output
Erecting barriers to entry
Pricing strategies to prevent or stifle competition
May not pursue profit maximisation – encourages unwanted entrants to the market
Sometimes seen as a case of market failure
Mrs Gordon's notes

15. Monopoly Vital revision Origins of monopoly:
Intro to Monopolies
Monopoly
Vital revision
Origins of monopoly:
Natural monopoly – usually on a network or grid… wasteful to duplicate!
Geographical factors – where a country or climate is the only source of supply of a raw material…quite rare. However, consider a single grocery store in a isolated village…
Government created monopolies – now sold off!
Through growth of the firm
Through amalgamation, merger or takeover
Through acquiring patent or license
Through legal means – Royal charter, nationalisation, wholly owned plc
Idea – give them a page of images/ scenarios to identify the ‘origins’ of the monopoly.
Mrs Gordon's notes

16. Identify the source of ‘monopoly’ power.
Intro to Monopolies
Identify the source of ‘monopoly’ power.
Thames Water – natural
O2 exclusive contract for new palm pre & Apple Iphone on contract / network
Apple Ipod – 80% market share
Mrs Gordon's notes

17. Identify the source of ‘monopoly’ power.
Natural
Geographical
Govt created
Co growth – EoS mergers etc
Patent / licence
Other
London Underground
O2 – iphone
BAA
Royal Mail
Microsoft
Bank of England
i-phone
i-tunes
De beers diamonds
Motorway service station
Thames Water

18. Identify the source of ‘monopoly’ power.
Natural
Geographical
Govt created
Co growth – EoS or mergers etc
Patent / licence
Other
London Underground 
O2 – iphone
BAA
Royal Mail
Microsoft
Bank of England
i-phone
i-tunes
De beers diamonds
Motorway service station
Thames Water

19. A natural monopoly?
Why does it make no sense to have a 2nd channel tunnel?
Despite being a natural monopoly, what competition does the firm face?

20. Label one side
HIGH
The other
LOW

21. Monopoly characteristics
Intro to Monopolies
Monopoly characteristics
Price
Efficiency
Innovation
Collusion
Promotion
Would you predict these to be HIGH or LOW?
Mrs Gordon's notes

22. Monopoly characteristics
Intro to Monopolies
Monopoly characteristics
Diagrams next lesson
Price – could be deemed too high, may be set to destroy competition (destroyer or predatory pricing), price discrimination possible.
Efficiency – could be inefficient due to lack of competition (X- inefficiency) or…
could be higher due to availability of high profits
Innovation - could be high because of the promise of high profits, Possibly encourages high investment in research and development (R&D). Could be low as there is no incentive to reduce costs.
Collusion – possible to maintain monopoly power of key firms in industry
High levels of branding, advertising and non-price competition
Mrs Gordon's notes

23. Need to include written explanation & business examples
Homework
Create a mindmap / poster / revision notes to help you remember the key causes of a monopoly.
This must include:
Natural monopoly
Geographical
Economies of scale / growth
Govt created
Company merger/takeovers
Patent / licence
Need to include written explanation & business examples

24. BAA break up of monopoly
Further reading