Question

Give one real-life example of a monopoly (or near-monopoly) in any economy, and explain what market-entry barriers make it a monopoly

Answer 1

A monopoly is a firm who is the sole seller of its product, and where there are no close substitutes. An unregulated monopoly has market power and can influence prices.Natural..regulaton pipeline industry is an real life exampleof a monopoly.Regulation policy favours increased competition Entry barriers to the commodity are not sustainable with the emergence of an active spot market. Bypass of the local distribution facilities by heavy users is occurring. With growing competition, pipelines are seeking more flexible rates to keep major customers on the system. Gas companies are shifting from a fully bundled package of end-to-end services toward a multitude of services a la carte. All the elements of vigorous competition seem to be in place. But this Pollyannish view ignores the presence of significant economic factors that support the continued social control of the industry. These factors are the presence of a monopoly bottleneck transportation facility, decreasing costs both short- and long-run, vertical integration, and the growing incidence of pipeline mergers and acquisitions. The goal of this chapter is to bring these two conflicting views into perspective. It is clear that the problems of the natural gas industry must be evaluated from a broad analytical approach..

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