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Monopolies

28 十二月, 2015 - 14:36

In analyzing perfect competition we emphasized the difference between the industry and the individual supplier. The individual supplier is an atomistic unit with no market power. In contrast, a monopolist has a great deal of market power, for the simple reason that a monopolist is the sole supplier of a particular product and so really is the industry. The word monopoly, comes from the Greek words monos, meanings one, and polein meaning to sell. When there is just a single seller, our analysis need not distinguish between the industry and the individual firm. They are the same on the supply side.

Furthermore, the distinction between long run and short run is blurred, because a monopoly that continues to survive as a monopoly obviously sees no entry or exit. This is not to pretend that monopolized sectors of the economy do not ‘die’ and reincarnate themselves in some other more competitive form; they do. But if a monopoly continues to exist, by definition there is no entry or exit in the industry.

\mid A monopolist is the sole supplier of an industry’s output, and therefore the industry and the firm are one and the same.

Economists’ thinking on monopoly has evolved considerably in recent decades. In part this is due to the impact of the opening up of national borders, in part due to the impact of technological change. The world is now more open and more subject to change, and so too are the circumstances governing monopolies. There are three main reasons for the existence and continuance of monopolies: scale economies, national policy and successful prevention of entry.