EBK PRINCIPLES OF MICROECONOMICS (SECON
EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 10, Problem 1QR
To determine

The difference between a monopoly and a natural monopoly.

Expert Solution & Answer
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Explanation of Solution

Monopoly is a market structure in which a single seller selling a single commodity has no close substitutes. In monopoly, the firm’s demand curve and market demand curve are the same, and there are high barriers to entry and exist in the market.

A natural monopoly is a kind of monopoly in which economies of scale work as a high barrier to entry. This would mean that, in a natural monopoly, the long-run average cost continuously falls as production increases. This low cost of production acts as a barrier to the entry of new firms into the market.

Economics Concept Introduction

Monopoly: Monopoly is a market structure, which is characterized by a single seller selling a single commodity without close substitutes. They have control over price and are known as price makers.

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