This revision video looks at the distinction between a pure monopoly and a firm that has monopoly (market) power.
What is a pure monopoly?
What are the key characteristics of pure monopoly?
What stops an industry becoming a pure monopoly?
A pure monopoly might have their legal monopoly taken away e.g. the Royal Mail lost their monopoly in parcels and letters delivery
Competition authorities might find other ways to inject competition e.g. access operators in the UK rail industry
Technological change creates new substitute products and competitors and helps to bring entry barriers down
Most industries are contestable to a degree – there is always the threat of potential rivals
What are the key features of a business having monopoly power in one or more markets?
The ability of a firm to influence or control the terms and condition on which goods are bought and sold. A profit-maximising firm with market power is most likely to use that market power to charge higher prices than if an industry was more competitive. The extent of monopoly power depends crucially on how we define the market.
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