monopoly and monopoly power Flashcards
1
Q
monopoly
A
a single producer who produces 100% of the output of a good in a market
2
Q
characteristics of monopoly
A
- profit maximisation
- price discrimination
-high barriers to entry - price maker
3
Q
factors that influence monopoly power
A
- high barriers to entry
-actions of competitors - advertising
-product differentiation
4
Q
Advantages
A
- significant supernormal profit can be invested into research and development can generate positive externalities
-generate export revenue - exploit economies of scale and reduce average cost of production
- high profits gov revnue
5
Q
disadvantages
A
- result in misallocation of resources
-consumers can be exploited by high prices
-monopolies have no incentive to be more efficient - consumers do not get choice
-loss of consumer surplus