1. Not just a game.

2. What is a monopoly? A monopoly is a market dominated by a single seller. It has one seller and many members of buyers. Monopolies are able to take advantage of the market, therefore they can charge high prices. Barriers to entry are the principle condition that allows monopolies to exist. *In 1890 The Sherman Antitrust Act was passed to prohibit abusive monopolies.

3. Economies of Scale Factors that cause a producer’s average cost to drop as production increases. With no economies of scale the average cost of producing each good increases as output increases

4. Effect of Economies of Scale

5. Natural Monopoly Market that runs most efficiently when one large firm provides most of the output. If a second firm enters a market, competition will drive down the market price. The government steps in to ensure that the firms wouldn’t waste resources building additional plants when only one is needed. A firm with natural monopoly agrees to let government control the prices it can change and what services it must provide.

6. Natural Monopoly Examples Ex. Public Water- If many different companies decided to produce water, they would set up overlapping pipes and pumping stations to deliver water to the same place. They would be wasting a lot of resources and money. So natural monopoly would have to take place.

7. Government Monopoly Monopoly created by the government The government creates barriers to entry in the market.

8. Technological Monopolies Government can give a company monopoly power by issuing a patent. Patent- gives a company exclusive right to sell a good or service at a specific date or time. Patents guarantee that companies can profit from their own research without competition. Firms that have patents are allowed to set prices that maximize their opportunity to make a profit.

9. Technological Monopolies Examples Ex. Choc O’late, who works for Hershey's Chocolate Company, invents a new chocolate bar. The FDA will give Hershey’s a patent for 20 years, for them to exclusively sell Mr. O’late’s chocolate bar.

10. Franchise Contract that gives a company the right to sell its good. A franchise is a chain company, such as Mcdonalds, Target or Walmart.

11. License Granting firms the right to operate a business. A license is the right to practice. Just like your drivers license allows you the right to operate a car, a government issued license grants a firm the right to operate a business.

12. License Ex. Kim and Jerry just graduated from Veterinary school and they want to own their own veterinary office. First they must get a license to be legal vets. So they can fulfill their dream of saving animals lives.

13. Price Discrimination A monopolist may be able to divide consumers into two or more groups and charge different prices to each group… whoa. As a basic principle consumers set a maximum price they will pay for a product. Monopolists will charge one group a higher price because that group is willing to pay more.

14. Price Discrimination Example Mr. Alka-Seltzer comes to Arlington High School to sell his action figures with life like hair, and he notices that Tommy and Sara are buying a lot of action figures each week. Whereas Shelly and Miguel are buying only a few each week. Tommy and Sara are buying twice as many toys as Shelly and Miguel so Mr. Alka- Seltzer decides that if he charges less to Shelly and Miguel he will make more money.

15. Market Power The ability to control prices and total market output. Market power and price discrimination will be found in any market structure except for perfect competition. The ability of a company to change prices and output like a monopolist.