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What is a Legal Monopoly?
For some products, the government erects barriers to entry by prohibiting or limiting competition. Under U.S. law, no organization but the U.S. Postal Service is legally allowed to deliver first-class mail. Many states or cities have laws or regulations that allow households a choice of only one electric company, one water company, and one company to pick up the garbage.
Most legal monopolies are utilities—products necessary for everyday life—that are socially beneficial. As a consequence, the government allows producers to become regulated monopolies, to insure that customers have access to an appropriate amount of these products or services. Additionally, legal monopolies are often subject to economies of scale, so it makes sense to allow only one provider.
Related Topics
- Market Structure
- Perfect Competition
- Bidding War
- Complements & Substitutes
- Substitution Effect
- Imperfect Competition
- Market Power
- Price Takers
- Price Makers
- Perfect Competition and Decision Making
- X-Efficiency
- Captive Market
- Contestable Market Theory
- Highest Profit Point in a Perfectly Competitive Market
- Marginal Revenue
- Using Marginal Revenue and Marginal Costs to Maximize Profit
- Marginal Revenue Curve
- Profit Margin and Average Total Cost
- Break Even Point - Cost Curve
- Shutdown Point - Cost Curve
- Short-Run Decisions Based Upon Costs in a Perfectly Competitive Market
- Marginal Costs and the Supply Curve for a Perfectively Competitive Firm
- Long-Run Average Supply (LRAS)
- Decisions to Enter or Exit a Market in the Long Run
- Long-Run Equilibrium in a Perfectly Competitive Market
- Constant, Increasing, and Decreasing Cost Industries
- Productive and Allocative Efficiency in Perfectly Competitive Markets
- Market Efficiency
- Market Inefficiency
- Pareto Efficiency
- Market Failure
- Search Theory
- Monopoly
- Natural Monopoly
- Legal Monopoly
- Bilateral Monopoly
- Promoting Innovation through Intellectual Property
- Predatory Pricing
- How Monopolists Set Price with the Demand Curve
- Total Cost and Total Revenue for a Monopolist
- Marginal Revenue and Marginal Cost for a Monopolist
- Inefficiency of Monopoly
- Perfectly Competitive Market
- Monopolistic Competition
- Duopoly
- Oligopoly
- Differentiated Products
- Perceived Demand for a Monopolistic Competitor
- Monopolistic Competitors Choose Price and Quantity
- Monopolistic Competitors and Entry
- Monopolistic Competition and Efficiency
- Cartel (Economics)
- Game Theory
- Traveler's Dilemma
- Prisoner's Dilemma
- Iterated Prisoner's Dilemma
- Nash Equilibrium
- Diner's Dilemma
- Trembling Hand Perfect Equilibrium
- Gambler's Fallacy
- Arrows Impossibility Theorem
- Backward Induction
- Tournament Theory
- Oligopoly and the Prisoner’s Dilemma
- Forcing Cooperation in a Prisoner’s Dilemma
- Cooperation and the Kinked Demand Curve
- Corporate Merger or Acquisition
- Antitrust Laws
- Herfindahl-Hirschman Index
- Concentration Ratio
- Other Approaches to Measuring Monopoly Power in an Industry
- Restrictive Practices under Antitrust Law
- Natural Monopoly
- Cost-Plus Regulation
- Price Cap Regulation
- Regulatory Capture