1、Unit 3Text:Monopoly（垄断）1.Key words2.Why monopolies arise3.Public policy toward monopolies4.Questionsbarriers to entrymarket powerbusiness licensepatent and copyright lawsnatural monopolyeconomies of scalemonopoly powereconomic well-beingtotal surplusmarginal-cost pricingdead-weight lossaverage-cost
2、pricingregulatory systempublic ownershipspecial-interest groupindustrial organizationmarket failurepolitical failure2.1 Definition and the fundamental cause of Monopoly2.2 Three main sources for barriers to entry2.1.1 Definition of Monopoly2.1.2 Fundamental cause of MonopolyA firm is a monopoly if i
3、t is the sole seller of its product and if its product does not have close substitutes.The fundamental cause of monopoly is barriers to entry:A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it.Barriers to entry,in turn,have three main sou
4、rces:A key resource is owned by a single firm;The government gives a single firm the exclusive right to produce some good or service;The costs of production make a single producer more efficient than a large number of producers.2.2.1 Monopoly Resources2.2.2 Government-Created Monopolies2.2.3 Natural
5、 MonopoliesThe simplest way for a monopoly to arise is for a single firm to own a key resource.Although exclusive ownership of a key resource is a potential cause of monopoly,in practice monopolies rarely arise for this reason.Actual economies are large,and resources are owned by many people.Indeed,
6、because many goods are traded internationally,the natural scope of their markets is often worldwide.There are,therefore,few examples of firms that own a resource for which there are no close substitutes.In many cases,monopolies arise because the government has given one person or firm the exclusive
7、right to sell some good or service.Sometimes the monopoly arises from the sheer political clout of the would-be monopolist.At other times,the government grants a monopoly because doing so is viewed to be in the public interest.The patent and copyright laws are two important examples of how the gover
8、nment creates a monopoly to serve the public interest.An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a lower cost than could two or more firms.A natural monopoly arises when there are economies of scale over the relevant range of output.In th
9、is case,a single firm can produce any amount of output at least cost.That is,for any given amount of output,a larger number of firms lead to less output per firm and higher average total cost.3.1 Increasing competition with antitrust laws3.2 Regulation3.3 Public ownership3.4 Doing nothingThe governm
10、ent derives its power over private industry from the antitrust laws,a collection of statutes aimed at curbing monopoly power.The antitrust laws give the government various ways to promote competition.They allow the government to prevent mergers.Antitrust laws have costs as well as benefits.Sometimes
11、 companies merge not to reduce competition but to lower costs through more efficient joint production.These benefits from mergers are sometimes called synergies.Means regulating the behavior of monopolists.This solution is common in the case of natural monopolies,such as water and electric companies
12、.These companies are not allowed to charge any price they want.Instead,government agencies regulate their prices.That is,rather than regulating a natural monopoly that is run by a private firm,the government can run the monopoly itself.This solution is common in many European countries,where the gov
13、ernment owns and operates utilities such as the telephone,water,and electric companies.In the United States,the government runs the Postal Service.The delivery of ordinary First Class mail is often thought to be a natural monopoly.Each of the foregoing policies aimed at reducing the problem of monop
14、oly has drawbacks.As a result,some economists argue that it is often best for the government not to try to remedy the inefficiencies of monopoly pricing.(1)What are the three reasons that a market might have a monopoly?(2)Give an example of a government-created monopoly.Is creating this monopoly necessarily bad public policy?Explain.(3)Discuss the drawbacks of a monopolistic market and their influences on the society.(4)What kinds of policies can be taken by the government to deal with the monopolistic behaviors?
