![]() Draw and explain the Natural Monopoly diagram (8 marks)Ĥ. Identify five characteristics of a Natural Monopoly (6 marks)ģ. Explain what a Natural Monopoly is (2 marks)Ģ. OFCOM – Regulates the communications industryġ. OFGEM – Regulates gas and electricity industry The government, therefore, needs to intervene to ensure these markets are regulated to protect the consumers best interests. Other examples of Natural MonopolyĪs Natural Monopolies are the only firms in the industry, they have a lack of competition. There would not be enough profit for both firms to survive and cover their costs in this industry. If another firm tried to compete with the London Underground, therefore causing both firms to share customers and profits. Therefore the industry can only have one firm providing this service. The cost of digging and maintaining the tunnels in this industry is extremely high. (Coming Soon) Examples of Natural MonopolyĪn example of a Natural Monopoly would be The London Underground. Of maybe there's one firm.Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes Natural Monopoly What is a Natural MonopolyĪ Natural Monopoly occurs where the industry can only support one firm. Whatever until you get closer and closer to this notion You gotta launch satellitesĪnd put cable under the ground and dig up roads and High barriers to entry in either one of those. To one because, once again, there's very, very, very Telecom, telecom providers might be close, although in most geographies, you have more than one telecom providers, although in some parts of the world, you're getting pretty close People to run power lines to the various houses. Utilities providers, utilities, where it's hard for multiple ![]() Over here, close to monopoly or at monopoly. Imagine things like things that take a lot of infrastructure in order to do that service. I actually don't know if that's the case, but let's just assume if that were the case it would be closer to a perfect competition. Perceive it as undifferentiated, and there might be many firms To low barriers to entry, and they can start producing pistachios. It takes to grow pistachios, and I apologize to any offense to any pistachio growers out there, but maybe they can just get enough land, and there's very close If someone wants to grow pistachios, I'm not familiar with what Pistachios, and you might be, most people are indifferent as to where their pistachios come from, although some people might beg to differ that certain types of pistachiosĪre better than others, but for the most part, that'd be closer to perfect competition. Might be, let's say, agriculture or a certain Things that I can imagine that are closer to perfect competition That are on this spectrum, some closer to perfect competition, some closer to a monopoly. That is absolutely perfect, but we can imagine markets Now, perfect competitionĪs I talked about, it's a bit of a theoretical idea. Who is selling anything, So you can decide what Taker, you are a price setter, price setter. Insurmountable, mountable, I'll just abbreviate it,īarriers, especially to enter, and instead of being a price Instead of no barriers to entry or exit, here we have the exact opposite, so you could say insurmountable, Instead of an undifferentiated product, well, it's differentiatedīecause it's the only firm. Selling or many firms producing, you have exactly one firm producing. Now the other extreme, this is where we have The market, both the buyers, the many buyers and the many sellers, they all know what the If they were to go above the market price, well then no one will buy from them, and so they will justīe price, price takers, and other things that we assumeĪbout perfect competition is that all of the actors in They get the product from, none of those firms can Why do they need to be price takers? Well, whatever the market price is, since no one cares which of these firms, which of these many firms Talked about in other videos, they need to be price takers. ![]() The firms over here, well, they have noīarriers to entry or exit, so no barriers to entry or exit. This is where they are sellingĪn undifferentiated product or service, undifferentiated, That in the other videos, but just as a review, this Perfect competition, perfect competition, and we've talked about ![]() Now at the left end, we can imagine this idealized Means to be a monopoly, and so to help us appreciate that, let's think about the spectrum In this video, we're going to dig a little bit into the idea of what it
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