as Theink about
monopoly firm in your
area and explain the reason for the existencez
the monopoly (as we have studied in the clash).
Explanation should be based on the
has been discussed in the class.
☺
the markets work efficiently all the time?
What role government can play
in the working
of a mastal? Explain in detail
Answers
Answer:
Key Points
Single ownership over a resource gives the owner the power to raise the market price of a good over marginal cost without losing customers to competitors.
De Beers is a classic example of a monopoly based on a natural resource. De Beers had a lot of market power in the world market for diamonds over the course of the 20th century, keeping the price of diamonds high.
In practice, monopolies rarely arise because of control over natural resources.
Key Terms
market power: The ability of a firm to profitably raise the market price of a good or service over marginal cost. A firm with total market power can raise prices without losing any customers to competitors.
economic rent: The portion of income paid to a factor of production in excess of its opportunity cost.