If consumers can’t be protected, the government might nationalize the monopolies in the market. The government allows natural monopolies, but it regulates them with the Federal Trade Commission Bureau of Competition to protect consumers. Typical examples of natural monopolies are companies operating in the energy production and distribution, the distribution of water, public transportation, telecommunications, and post office. Although a NM faces high fixed production costs and high distribution costs, the average cost declines to the point that the demand curve intersects the average cost curve. Usually, natural monopolies operate in industries that require advanced technology and/or raw materials to operate. Companies that consider entering the market are aware that they cannot compete at the low cost that the NM competes because there are typically large economies of scale involved. ![]() A NM is less concerned about new entrants in the market that could undermine its market share and power. It occurs naturally without collusion or unfair play. A natural monopoly is exactly what the name suggests. In other words, it’s when one company controls a market because of unique product, manufacturing, or market conditions. These barriers to entry can include high start up costs, high fixed costs, difficulty in obtaining the needed raw materials, as well as many other things. Examples: Microsoft and Windows, DeBeers and diamonds, your local natural gas company. An unregulated monopoly has market power and can influence prices. ![]() Definition: A natural monopoly arises when a single firm supplies the entire market with a particular product or a service without any competition because of large barriers to entry. Monopoly A monopoly is a firm who is the sole seller of its product, and where there are no close substitutes.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |