MONOPOLY

MONOPOLY
01 Pure Monopoly

02 Barriers to Entry

03 Perfect Competition VS. Pure Monopoly

04 Natural Monopoly

05 Monopolistic Competition
 01
PURE MONOPOLY
 01 PURE MONOPOLY

o Monopoly = mono means “one” and poly means “seller”

o Pure monopoly is a market environment where there can be only one single seller
of a certain economic goods and services.

Examples of pure monopolies are rare, but they do exist; some examples include:
─ utility companies (water and electricity)
─ cell service providers
─ professional sports team
─ Microsoft
 01 PURE MONOPOLY

o Monopoly also has high barriers to entry, this means to say that it can prevent a new
firm from entering a market.
o Monopolies uses patents and marketing spending to build brand loyalty and make
entry harder.

Advantages of Monopoly
─ Monopoly avoids duplication and hence avoids wastage of resources.
─ Due to the fact that monopolies make lots of profits, it can be used for
research and development and to maintain their status as a monopoly.
 02
BARRIERS TO ENTRY
02 BARRIERS TO ENTRY

Economies of Scale
Capital Requirements
Pure Quality and Cost Advantages
Product Differentiation
Control of Resources
Patents, Copyrights, and Other Legal Barriers
 03
PERFECT COMPETITION VS. PURE MONOPOLY
03 PERFECT COMPETITION VS. PURE MONOPOLY

PERFECT COMPETITION PURE MONOPOLY

o PRICE TAKERS o PRICE MAKERS

o many sellers and many o single seller and many
buyers buyers
o no market control o has a total market control
o no barriers to entry and o has barriers to entry and
exit exit
o perfectly homogenous o lack of substitutes
goods; lot of substitutes
 04
NATURAL MONOPOLY
04 NATURAL MONOPOLY
o A Natural monopoly is a type of monopoly that exists due to the high start-up costs of cond
ucting a business in a specific industry. A company with a natural monopoly might be the only p
rovider or a product or service in an industry or geographic location. Natural monopolies can a
rise in industries that require unique raw materials, technology, or similar factors to operate.

KEY TAKEAWAYS
A natural monopoly is a type of monopoly that exists due to the high start-up costs of conducting a business
in a specific industry.
A company with a natural monopoly might be the only provider or a product or service in an industry or ge
ographic location.
Natural monopolies are allowed when a single company can supply a product or service at a lower cost th
an any potential competitor.

Importance: A natural monopoly usually exists when it's efficient to have only one company or service provi
der in an industry or geographic location.
Examples of Natural Monopoly:
>Natural gas distribution system
>Electric Power distribution
>Trash Collection
>Cable Television
>Microsoft
>Railways
>Water Companies
 05
MONOPOLISTIC COMPETITION
05 MONOPOLISTIC COMPETITION
o Monopolistic competition characterizes an industry in which many firms offer
products or services that are similar, but not perfect substitutes.
o Barriers to entry and exit in a monopolistic competitive industry are low, and the
decisions of any one firm do not directly affect those of its competitors.
o Monopolistic competition is closely related to the business strategy of brand
differentiation.
KEY TAKEAWAYS
─ Monopolistic competition occurs when an industry has many firms offering products that are similar but
not identical.
─ Unlike a monopoly, these firms have little power to set curtail supply or raise prices to increase profits.
─ Firms in monopolistic competition typically try to differentiate their product in order to achieve in order
to capture above market returns.
─ Heavy advertising and marketing is common among firms in monopolistic competition and some
economists criticize this as wasteful
05 MONOPOLISTIC COMPETITION
FINISH NA