Market structures and competition

TYPES OF MONOPOLIES

• Natural Monopolies
• A situation in which costs are minimized by having a single firm produce the product
• The nature of the industry dictates that society would be better served by only one supplier
• Telephones, gas, electric, public transportation
• To set up telephone lines for multiple carriers, pipes for multiple gas companies, electricity for multiple suppliers would be chaos and not economically viable
• Utility companies granted permission from the government to act as a monopoly in a certain area, but they must also follow regulations

TYPES OF MONOPOLIES

• Geographic Monopolies
• A monopoly exists because no other business in the immediate area offers any competition
• Gas Station in middle of nowhere
• This may not last as others decide to start in the area to compete

TYPES OF MONOPOLIES

• Technological Monopolies
• A firm or individual has discovered a new manufacturing technique or has invented or created something entirely new
• I-phone
• Hybrid car
• If you get a patent on the product, no one else can legally produce it

TYPES OF MONOPOLIES

• Government Monopoly
• A business the government owns and operates
• Found at all levels and are generally products the private sector may not adequately provide
• Local water authorities, state liquor control, federal –uranium