Topic

Pure Monopoly

Instructions

Read pages 255, 260-263 and 268-270 of Economics.

Consider the following as you read:

What are the barriers to entry that shield pure monopolies from competition?
What are the economic effects of monopoly?

Answer preview

Pure monopoly is experienced when one company is the sole manufacturer of a product whereby there are no close substitutes, non-price competition and obstacles preventing competitive companies. Since barriers to entry usually prevent incumbent companies and limit competition in the marketplace, it is clear that they can contribute to unreasonable prices and hence they are most critical when explaining antitrust policy. In addition to this, barriers to entry normally result to the existence of monopolies or allow firms to enjoy the market power.

Word count: 206