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Traditional examples of natural monopolies

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How does globalization lead to greater competition in the market place? What are the implications for market structure in industries opened to global competition?

What is an example of a natural monopoly? Will a monopoly always produce at a profit-maximizing level of output? Explain.

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Globalization can lead to more competition in the market because it allows for foreign companies to enter the market and compete with local companies. For example, Chinese shrimp imported into Canada will compete with Canadian producers and create price competition, which would increase the amount of shrimp in the market, lower the price and improve the lot of consumers who eat shrimp. It is important to note, however, that businesses and workers in Canada might suffer from such opening of the borders. Chinese labor costs are lower, which gives them that advantage, but it is note worthy that they face higher transportation costs than Canadians businesses whose products must travel shorter distances to retailers. In terms of market structure, it would depend on the nature of the industry. Staple industries, like shrimp, steel, cement, wheat, etc, would simply be ...

Solution Summary

The answer explains how globalization can affect market structure as well as the operation of natural monopolies and their ability to maximize profits.

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