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According to N. Gregory Mankiw ""A firm is a monopoly if it is the sole seller of its product and if its product does not have any close substitutes."" (N. Gregory Mankiw – Principles of Microeconomics 8th edition)

Does the Jamaica Public Service Company Limited (JPS) fully fit the description of a monopoly? Give at least one argument in favor and one against.

User Limonka
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Final answer:

The Jamaica Public Service Company Limited (JPS) can be considered as a monopoly based on its sole seller status of electricity in Jamaica, which gives it significant market power. However, the presence of alternative energy sources can be seen as an argument against JPS being a monopoly.

Step-by-step explanation:

Monopoly arises when a single firm sells a product for which there are no close substitutes. A monopoly can be seen as a firm that has a large market share and significant market power, allowing it to charge high prices and make decisions without fear of competition.

Regarding the Jamaica Public Service Company Limited (JPS), one argument in favor of considering it as a monopoly is that it is the sole seller of electricity in Jamaica, with no other major competitors providing the same service. This lack of close substitutes gives JPS significant market power.

On the other hand, one argument against classifying JPS as a monopoly is the presence of alternative energy sources such as solar panels and wind turbines. While these alternatives may not be identical to electricity provided by JPS, they are similar options that provide electricity and decrease reliance on JPS. This suggests the presence of substitutes, though they may not be as widespread as JPS's service.

User Laruiss
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