Answer to Question #49587 in Macroeconomics for Christoph

Question

Given that monopolies are bad, how is it possible that a monopoly baseball team taking over the monopoly broadcaster actually benefits the fans who watch the game on TV? Use an appropriate economic model.

Answer 1

A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity (this contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry). Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The verb "monopolise" refers to the process by which a company gains the ability to raise prices or exclude competitors. In economics, a monopoly is a single seller. In law, a monopoly is a business entity that has significant market power, that is, the power to charge high prices. Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market). Given that monopolies are bad, it is quite possible that a monopoly baseball team taking over the monopoly broadcaster actually benefits the fans who watch the game on TV, because this new monopoly will show more games and programs about its team and fans will have better ability to watch their favorite team, even if the price is higher now.