![]() Limit pricing – This is a pricing policy that can be used by an incumbent firm.They are sometimes called artificial entry barriers. In addition, there are other barriers, which a monopolist can deliberately create. This is because they arise without deliberate intent or action on the part of the incumbent firm. For instance, it is not currently possible for new train companies to operate on routes already served by an existing operator.Īll of the above barriers are described as innocent entry barriers. Legal barriers – In some industries firms may be protected from new entrants by legal restrictions.Natural cost advantages – Some producers may own or have better access to superior or cheaper resources which makes it difficult for new producers to compete.A new water company, for instance might struggle to raise the finance to build reservoirs This makes it difficult for new firms to enter, as they may struggle to raise the capital. Capital costs – Some industries require huge investment in buildings and machinery before any production is possible.Economies of scale – The incumbent firm may be producing at the minimum efficient scale and therefore have significant cost advantages over a new firm, which is unlikely to generate enough sales in the short or medium term to get costs down.A monopoly water company, for instance, has much more power than a monopoly train service, since in the latter case, customers may have the option of other forms of transport.Ī monopolistic market is often difficult for new firms to enter, for the following reasons: ( see also notes on 3.4.4) The power of a monopolist over the market also depends on the availability of a close substitute. For instance, ‘Facebook’ is easily the largest social media platform, although there are others. It is therefore better to think of a monopoly as a firm that dominates its market, being much bigger than its rivals. If one firm on its own has at least 25% of the market, it is considered to be a monopoly and can attract the attention of the competition watchdog. The legal definition of a monopoly focuses instead on market concentration. Where there is just one firm in the market, a pure monopoly exists. Conflicts and Trade-Offs Between Objectives and Policies.Equilibrium Levels of Real National Output.The Benefits and Costs of Economic Growth.The Characteristics of Aggregate Demand.The UK Economy - Performance and Policies.Positive and Normative Economic Statements. ![]() Alternative Views of Consumer Behaviour.Free Market Economies, Mixed Economy and Command Economy. ![]() Price, Income & Cross Elasticities of Demand.Specialisation and the Division of Labour.Introduction to Markets and Market Failure.Wage Determination in Competitive and Non-competitive Markets.Business Behaviour and the Labour Market.Factors Influencing Growth and Development.Macroeconomic Policies in a Global Context. ![]()
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