monopoly and monopoly power Flashcards

1
Q

monopoly

A

a single producer who produces 100% of the output of a good in a market

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2
Q

characteristics of monopoly

A
  • profit maximisation
  • price discrimination
    -high barriers to entry
  • price maker
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3
Q

factors that influence monopoly power

A
  • high barriers to entry
    -actions of competitors
  • advertising
    -product differentiation
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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
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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
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