Monopoly power

Occurs when

There is a single firm operating in a market

Examples

Network rail

Google

Facebook

Monopoly power is the

Ability of a firm to influence the price of a particular good in a market

A firm with monopoly power could

Control the supply of a good to influence its price- the firm is able to be a price maker

Legal monopoly

A single supplier by law e.g. air traffic control

Natural monopoly

Only a single firm can efficiently provide the good or service e.g. network rail, national grid

Monopoly power

Any firm controlling 25% or more of the market is said to have monopoly power

Pure monopoly

One firm 100% market share

Monopolies deliver a worse outcome for consumers as

They can set high prices

Lack of innovation due to lack of competition

Exploit consumers

Service could be inefficient

Less choice

Monopolies bring benefits such as

Provide high quality products

Research and development

Easier for customers

Economies of scale- costs of production will decrease as output increases

Consumer surplus

Difference between price paid by consumers and what they’re willing to pay

Producer surplus

Difference between the price that firms produce and what they would be willing to produce at