00:02
Here we have three different questions that we're looking at all pertaining to monopolies.
00:06
The first one asks, give an example of a government -created monopoly.
00:11
Is creating this monopoly necessarily bad public policy? so first, let's talk about a monopoly.
00:18
A monopoly refers to a market structure where there is one seller who has the sole possession of such a particular good.
00:30
So one seller of a particular goal.
00:40
An example of a government -created monopoly would be defecutive.
00:46
And is creating this monopoly necessarily bad public policy? the answer is, in short, is no.
00:58
This is not necessarily bad public policy.
01:13
And in the case of defense of countries, governments make policies and issue weapons, and it doesn't allow any entrant of any other public or private firm.
01:23
Although monopoly leads to no competition of that particular good and therefore inefficiency in development, doesn't take much, it cannot be considered necessarily bad in cases like defense because if private firms are allowed to compete, then it might lead to more wars and more production of destructive weapons because they would want to see that demand.
01:46
In order to sell a good, we need demand.
01:48
So if we allow private firms to enter in like the case of defense, there might be a push for more wars or fighting so that they can sell more of their weapons.
01:58
So no, it's not necessarily bad public policy.
02:01
And the other reason that it's not bad public policy is because privately, as private citizens, most people don't individually want to contribute to it.
02:11
If we were sent a bill, for example, for defense, we would be like, why should i pay for this? what good, am i getting out of this? we're actually getting a lot of good out of this.
02:22
And logically, we know this, but because we don't see it in front of our face, like we do a tangible item, it's harder for us to see or perceive what we are getting out of it.
02:33
And so for the greater good, things like defense, it is good public policy to allow what government created monopoly.
02:42
The second question says define a natural monopoly.
02:47
What does the size of a market have to do with whether an industry is a natural monopoly? so a natural monopoly occurs as it says naturally.
02:57
So a natural monopoly arises when the cost of starting.
03:19
So when the startup costs or fixed costs, so starting up and fixed costs are very high, which means, which makes it so that other firms cannot enter the market.
03:58
And the reason they can't enter the market is because they don't view it as there being a point to entering the market...