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Antitrust
McGraw-Hill/Irwin
Chapter Outline
WHATS WRONG WITH MONOPOLY NATURAL MONOPOLY AND NECESSARY MONOPOLY MONOPOLIES AND THE LAW EXAMPLES OF ANTITRUST ACTION
McGraw-Hill/Irwin
D
F Qmonop QPC Deadweight Loss from Monopoly = EBC
McGraw-Hill/Irwin
McGraw-Hill/Irwin
Necessary Monopolies
Natural Monopolies
A natural monopoly typically results from substantial barriers to entry (a legal or economic mechanism that prevents firms from competing in an industry) This often happens in the utility industry where fixed costs are very high,
McGraw-Hill/Irwin
MR Qmonopoly
McGraw-Hill/Irwin
McGraw-Hill/Irwin
Anti-Trust Law
The Sherman Anti-Trust Act
This law and other antitrust legislation that followed it makes it illegal to
use the monopoly power in one market to gain market power in another market. (e.g. a local telephone company cannot require use of their cellular system.) become a monopoly by merging with a competitor (without government approval.)
McGraw-Hill/Irwin