responses

Responses

Unit 7 Discussion

Michael l.

5/7/2014 6:58:51 AM

       According to Krugmen and Wells, a natural monopoly may arise when high fixed costs create a barrier to entry in a market. Railroads are one example of a natural monopoly. The sheer amount of capital it takes to start a railroad presents this barrier to entry. In order to move the first carload of freight a massive amount of money needs to be invested in infrastructure (track, locomotives, cars), and a massive amount of personnel need to be hired to operate and maintain the railroad. There are few railroads in the United States, and each one tends to operate in a particular are of the country with the exception of Amtrak. These rail lines are Union Pacific, BNSF, Kansas City Southern, CSX, and Norfolk Southern.

The government regulates natural monopolies extensively so that they don’t restrict the production of their product to inflate their profits on the backs of consumers.

 References:

 Krugmen, P. 2013. Microeconomics 3rd Edition. Retrieved from https://online.vitalsource.com/#/books/146416651X/pages/84073595

unit 7 Discussion

Branden

5/7/2014 7:08:29 AM

Professor and class,

A natural monopoly is one that is the domination of one brand or company that will set out to take control and serve a whole independent market to control costs for themselves. This would be any kind of utilities company.  In this industry there is usually one main source of the supplies and they outsource to their industries. They do this because it helps to keep costs down. They are looking to keep things competitive and help the consumers as well. However if it is that one main company would dominate the market and with this being done consumers would reap the benefits of this since they could enjoy low prices. 

Branden B