Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393623826
Author: Lee Coppock, Dirk Mateer
Publisher: W. W. Norton & Company
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Question
Chapter 10, Problem 1QFR
To determine
Distinction between Natural
Expert Solution & Answer
Explanation of Solution
The term Monopoly refers to a market situation in an economy where there prevails a single seller having exclusive rights to sell its products and tends to control the industry. For example, there was a time when only the US government enjoyed monopoly power over mail delivery. Later some other companies like UPS, FedEx etc. entered into this market.
A natural monopoly is a type of monopoly which enjoys the full monopoly powers in the market. Natural monopoly emerges when it makes sense for the single firm that prevails in one sector with high productivity. In this scenario, the other competitors cannot enter due to tight barriers or high cost of entry along with infrastructural set up. The examples of natural monopoly are seen in case of railways, plane manufacturing, utilities etc.
Economics Concept Introduction
Introduction:
In
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