MONOPOLY MARKETS
INTRODUCTION: As we learnt in a previous lesson  competitive markets have advantages of choice, low prices and efficiency in the use of scarce resources. However they may not be able to benefit from larger economies of scale that might be possible if they were the sole producer within a market. It stands to reason therefore that when it comes to monopoly (a market dominated by a single firm) it will not have the benefits seen of competitive markets but will benefit from from economies of scale. In this lesson we will be considering what types of product markets would benefit from the formation of monopoly firms and what will be the benefits and costs to consumers and society generally. 
HOW: Demonstrate understanding of the benefits and costs of the formation of monopoly markets in terms of the effect on price, choice, efficiency and other impacts on the consumer and society.
WHY: To be able to suggest whether governments should intervene to prevent the formation of monopolies.
ACTIVITY 1: Complete some research on Martin Shkreli (see the newspaper article below), who in 2018 was referred to as the 'most hated man in America' by some.
  1. What did his companies sell?
  2. What was he and his company accused of doing?
  3. How did this affect ordinary consumers?
  4. What should be the government's response to cases like this?  What can it do?
  5. Is this case unusual or does it occur in other industries as well?

Potential Martin Shkreli jurors: we can't be impartial over 'most hated man' in US

Several potential jurors at the federal securities fraud trial of Martin "Pharma Bro" Shkreli were excused on Monday after telling the judge they couldn't be impartial toward the flamboyant former pharmaceutical CEO because of his notoriety for raising the cost of a life-saving drug 5,000%.

ACTIVITY 2:  Look at the demand curve below for a chemicals company. Imagine the industry was a monopoly.
  1. Why would the chemical's firm have an incentive to restrict market supply?
  2. In terms of revenues what would be the pay-off in doing so?
  3. What does it mean when economist say that monopolists 'are price makers' and competitive firms are 'price takers'?
ACTIVITY 3: THE MERGER OF HBOS AND LLOYDS TSB. Read Pages 253-254 in the textbook. Now complete the gap-filler activity on the merger of these two banks in the UK.
Explain how the merger of these two banks could lead to each of the following market failures that often result from the formation of a monopoly?
  1. Less consumer choice
  2. Lower output and higher prices
  3. Lower product quality
  4. X-inefficiency
monopoly_gap_filler.doc
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ACTIVITY 4; RESEARCHING MARKET SHARE: Go to the website here, which shows a list of the world’s largest 500 companies. Many have a market share close to 25% ( technical monopoly), or in some cases even more than that.
  1. Compare the list for 2019 with 2010. How has it changed?
  2. For 2019, click on two to three companies you do not know much about and read the company information presented. Who are they? What do they do?
  3. Use this map from the same website to explore a wider range of companies.
  4. Can use any of the reasons on pages 255 -256 to explain how they have achieved technical monopoly market share? (Economies of scale, capital size, historical reasons, legal considerations, predatory pricing, exclusive dealing, tying or bundling). Take some brief notes on each of these reasons for the formation of monopolies.
Pair, share: Once you have done that, join together with a friend and share some of your findings. Any surprises?
ACTIVITY 5: Complete the crossword to demonstrate your understanding of the competition topic. Can you complete it without referring to the text book?
market_structure_monopoly.pdf
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EXTEND YOUR LEARNING: Have a game of monopoly of course! What is the aim of the game? How many of the key terms from your learning can you use. What are the realistic and unrealistic assumptions of the game?
Watch the following Netflix episode 'The Legal Marijuana Industry is Rigged'. How has this industry become more monopolized as it has become legalized. What role are government regulations having on the market share within this industry?  (warning: contains sensitive themes).