Examples of Natural monopoly in the following topics:
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- Natural monopolies occur when a single firm can serve the entire market at a lower cost than a combination of two or more firms.
- For example, imagine there are two firms in a natural monopoly's market and each of them produces half of the quantity that the monopoly produces.
- The total cost of the natural monopoly is lower than the sum of the total costs of two firms producing the same quantity .
- Natural monopolies tend to form in industries where there are high fixed costs.
- Examples of natural monopolies are water and electricity services.
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- Natural monopolies are conducive to industries where the largest supplier derives cost advantages and must be regulated to minimize risks.
- A monopoly is a business or organization that maintains exclusivity of the supply of a particular product or service, and can evolve naturally or be designed specifically based on the nature of a particular market or industry.
- Price ceiling:Another way a natural monopoly may be regulated is through the enforcement of a maximum potential price being charged.
- While the concept of a monopoly is generally perceived as a threat to free markets, there are specific circumstances where natural monopolies are either pragmatically useful (cost effective) or virtually unavoidable.
- While monopolies are generally poor economic constructs for creating value, natural monopolies are predicated on the fact that a single supplier can achieve the greatest economies of scale (cost advantages).
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- Monopolies rarely occur in a pure form.
- When the term "monopoly" is used it is usually referring to a degree of monopoly or market power.
- Natural monopoly caused by economies of scale usually associated with a cost structure with a high fixed cost relative to variable costs.
- A natural monopoly is the result of significant economies of scale due to a high fixed cost.
- If the market demand intersects the LRAC as it falls (or at its minimum), a natural monopoly exists.
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- Control over a natural resource that is critical to the production of a final good is one source of monopoly power.
- Control over natural resources that are critical to the production of a good is one source of monopoly power.
- A classic example of a monopoly based on resource control is De Beers .
- In practice, monopolies rarely arise because of control over natural resources.
- International trade is an additional source of competition for owners of natural resources.
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- Government regulation was justified on the theory that telephone companies, like electric utilities, were natural monopolies.
- In 1984, a court effectively ended AT&T's telephone monopoly, forcing the giant to spin off its regional subsidiaries.
- A decade later, pressure grew to break up the Baby Bells' monopoly over local telephone service.
- But economists said the enormous power of the regional monopolies inhibited the development of these alternatives.
- It said the regional monopolies had to allow new competitors to link with their networks.
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- A monopoly is a specific type of economic market structure.
- Profit maximizer: a monopoly maximizes profits.
- Price maker: the monopoly decides the price of the good or product being sold.
- High barriers to entry: other sellers are unable to enter the market of the monopoly.
- In a monopoly, specific sources generate the individual control of the market.
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- A monopoly, on the other hand, exists when there is only one producer and many consumers.
- Public utility companies tend to be monopolies.
- Monopoly power comes from markets that have high barriers to entry.
- Monopoly and perfect competition mark the two extremes of market structures, but there are some similarities between firms in a perfectly competitive market and monopoly firms.
- This creates a monopoly.
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- The supply of natural resources such as precious metals or oil deposits is limited, giving their owners monopoly powers.
- Monopolies exhibit decreasing costs as output increases.
- Decreasing costs coupled with large initial costs give monopolies a cost advantage in production over would-be competitors.
- Government monopolies in public utilities, telecommunications systems, and railroads have also historically been common.
- In other instances, the government may be an invested partner in a monopoly rather than a sole owner.
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- A monopoly can diminish consumer choice, reduce incentives to innovate, and control supply to enforce inequitable prices in a society.
- However, perfect competition is more of a theoretical competitive framework because markets will naturally deviate to varying degrees (in order to capture profitable returns).
- Through utilizing this control strategically, a profit-maximizing monopoly could create the following societal risks:
- As a result, a monopoly causes deadweight loss, an inefficient economic outcome.
- Outline the effect of a monopoly on producer, consumer, and total surplus
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- There are two types of government-initiated monopoly: a government monopoly and a government-granted monopoly.
- There are instances in which the government initiates monopolies, creating a government-granted monopoly or a government monopoly.
- Government-granted monopolies often closely resemble government monopolies in many respects, but the two are distinguished by the decision-making structure of the monopolist.
- In a government-granted monopoly, on the other hand, the monopoly is enforced through the law, but the holder of the monopoly is formally a private firm, which makes its own business decisions.
- In a government monopoly, an agency under the direct authority of the government itself holds the monopoly, and the monopoly is sustained by the enforcement of laws and regulations that ban competition or reserve exclusive control over factors of production to the government.