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Question: Outline the economic argument against monopoly. Is there anything, which can be said in favour of firms that have monopoly power?

Answer: A monopoly is an industry where there is a single supplier of a good/service that has no close substitutes. It also has a barrier preventing new firms from entering. These barriers to entry include laws, patent restrictions, product differentiation, brand loyalty and licences. Monopolies can be national (Royal Mail), regional (water companies) or local (petrol stations). The three characteristics of a monopoly are that there is only one firm, there are substantial barriers to entry and the monopolist is a short run profit maximiser. There are four causes of monopolies. They are patents and other forms of intellectual property, control of an input resource, government and decreasing costs....(short extract)

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  • Subject: Economics
  • Course: Macroeconomics
  • Level: A-Level
  • Year: Not applicable
  • Mark: 61%
  • Words: 1082
  • Date submitted: March 29, 2009
  • Date written: Not available
  • References: No
  • Document type: Essay*
  • Essay ID: 1141

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