Do Pure Monopolies Exist
Angela M. Turpen
ECO100: Survey of Contemporary Economic Issues (ABQ1211B)
Instructor: Phelicia Price
April 2, 2012
“No firm is completely sheltered from rivals; all firms compete for consumer dollars. If that is so, then pure monopoly does not exist. Do you agree?” (Brue, McConnell, Flynn, 2010). I would have to agree with this statement. I do not believe that there is such a thing as a pure monopoly. There are always alternatives or substitutes available when choosing to purchase products or services from firms. Pure monopoly exists when “a single firm is the sole producer of a product for which there are no close substitutes” (Brue, McConnell, & Flynn, 2010). There are less pure forms of monopoly and near-monopolies, but not totally pure monopolies. There are several main characteristics that must be present in order for a pure monopoly to exist. These are: single seller, no close substitutes, price maker, and blocked entry.
A pure monopoly is an industry in which a single firm is the sole producer of a specific good or the sole supplier of a service. Their product is unique in that there are no close substitutes, therefore, consumers who decide not to purchase the monopolized product must do without it. Many people will argue that electric companies are pure monopolies. I disagree because there are alternatives available: oil, propane, natural gas, solar, and wood are substitutes that can be used as sources of light and heat. The pure monopolist controls the total quantity supplied and as a result has considerable control over price; it is a price maker. The pure monopolist confronts the usual downward-sloping product demand curve and can change its product price by changing the quantity of the product it produces. A pure monopolist faces no immediate competition because certain barriers keep potential competitors from entering the industry. Those barriers may be economic (economic of scale),...
Please join StudyMode to read the full document