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  • Monopoly and Monopoly Power
    • Pure monopoly- when there is only one firm in the market - very rare and is normally a state owned monopoly or protected by law
    • Working Monopoly- Firm with 25% of the industry's total sales
    • Dominant firm- at least 40% of the market power
    • Monopoly Power- the power of a firm to act as a price maker rather than a price taker
    • Sources of monopoly power- Monopolies can become established in a number of ways e.g
      • Natural monopoly- one large business can supply the entire market at the lower prices than two or more smaller ones- they have fully exploited economies of scale. There cannot be more than one efficient provider of a good. In this situation competition might actually increase costs and prices
        • Example- network rail, utilities (gas, electric, water)
      • Geographical  cause of monopoly- A single grocery store in an isolated village can be classed as a local monopoly- entry to this market by a second store is restricted by the small nature of the local market. other reasons could be climatic reason, countries having a large supply of a raw material or food stuff
        • Example- oil, coco, beans,bananas
      • Government created monopoly- they create monopolies in industries they believe are too important to leave to competition. industries such as coal and steel, rail were nationalised. The government may create a private monopoly this is where certain businesses can be briefly protected by the law from competition
        • Example- telephony market which is now highly competitive in the UK
      • Growth - monopoly power can come from the successful organic (internal growth) of a business through mergers and acquisitions ( also known as integration of firms
        • Horizontal integration- this is where two firms join at the same stage of production in one industry
          • jaguar land-rover- share skills so therefore more efficient due to sharing raw materials
        • Vertical integration- this is where a firm integrates with different stages of production
          • by buying its supplies or controlling the main retail outlets e.g shell
        • Forward vertical integration- occurs when a business merges with another business further forward in the supply chain
          • example phone company merging with a shop retailer
        • Backward vertical integration- occurs when a firm merges with another business at precious stage of the supply chain
          • Tescos bought out in bulk (whole sale market) cash and carry so a link in that part of the supply chain


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