Monopoly

1
Monopoly

• In this lesson, students will be able to
  identify characteristics of a monopoly.
• Students will be able to identify and/or define
  the following terms
• Monopoly
• Natural Monopoly
• Patent

2
A monopoly is a market dominated by a single
seller.
3
Monopoly

• A monopoly is a market dominated by a single
  seller.
• In general, monopolies are illegal.
• Monopolies lead to higher prices, inferior
  quality of products, and reduced supply.

4
Monopolies can lead to higher prices. Monopolies
do not benefit consumers.
5
Antitrust Laws

• The government generally prevents monopolies from
  forming or breaks up existing monopolies.
• Antitrust laws are laws that prevent the
  formation and continuation of monopolies.
• The government recognizes that monopolies do not
  benefit consumers.

6
The government carefully watches market activity
and prevents the formation of most monopolies.
7
Natural Monopolies

• However, the government does allow the formation
  of some monopolies.
• A natural monopoly occurs when a market runs most
  efficiently with one firm supplying all of the
  output.
• An example of a natural monopoly is public water.

8
Rather than building an overlapping network of
pipes, one company serves customers best.
9
Patents

• A patent also provides a supplier with monopoly
  power.
• A patent is a license given to the inventor of a
  product to be the sole supplier of the product
  for a number of years.
• A patent is an incentive for invention.

10
Nextel had a patent for a number of years on one
of its phone features.
11
The Market Spectrum

• Perfect competition is vastly different than a
  monopoly.
• In perfect competition, many sellers sell
  identical products.
• In a monopoly, a single seller is the sole
  supplier.

12
The old monopolies have been broken up.
13
The phone company was once a natural monopoly.
The government has since deregulated it.
14
Questions for Reflection

• Define monopoly.
• List three problems created by monopolies.
• Why does the government enforce Antitrust laws?
• Why is public water a natural monopoly?
• What happens when a market is deregulated?