Pure Monopolies

Pure Monopolies Monday, April 11, 2011 In the case of a pure monopoly, there is only one instance where there could be a monopoly and that would be a power company. Usually in an urban and rural area, there is only one power company that residents of that town use. There is not usually another power company that is in competition that other residents use. There are other forms of power that residents may use such as solar, wind, or gas that could provide their electricity or heat. So, if the consumer wants to use another form of power other than what there local power company provides, then, in this case, a pure monopoly does not exist. A monopoly would be if a firm can provide the service that no other firm in the area can provide. In this case, there is no competition and consumers would be forced to spend their dollars with the firm. Cross elasticity of demand can determine if a monopoly exists or not. If the demand for a product is greater than one, then there is the opportunity that consumers will take their business elsewhere and the firm has less control of the market. If the demand curve is horizontal, there is no monopoly and competitive firms in the industry are free to market their product if the price is at the equilibrium price. If the industry is a monopoly, then the firm is big enough to affect the price which allows the firm to raise prices. In this case, the consumer has no choice but to use that firm for their product. Resources answers.yahoo.com › ... › Other - Business & Finance www.weegy.com/?ConversationId=37BF65CB www.colorado.edu/Economics/.../Small/2010_chpt10answers.pdf