4 - concentrated markets: theory of monopoly

Question 1

obstacles that stop new firms entering a market

Answer 1

barriers to entry

Question 2

the gap between the actual and lowest possible cost (not reducing the costs to their lowest level)

Answer 2

x-inefficient

Question 3

a grant of temporary monopoly rights over a new product

Answer 3

patent laws

Question 4

ownership of rights, e.g a book, giving redress at law for copying a third party

Answer 4

copyright

Question 5

taking a firm/industry into public ownership - ownership by the state

Answer 5

nationalised

Question 6

setting a price so low that other firms will not enter the industry

Answer 6

limit pricing

Question 7

irretrievable costs that occur when a firm exits an industry

Answer 7

sunk costs

Question 8

a firm with 25% or more market share

Answer 8

legal monopoly

Question 9

a way of distinguishing a product from that of competitors

Answer 9

product differentiation

Question 10

setting the price at the level of marginal cost

Answer 10

marginal cost pricing

Question 11

setting the price at the level of average cost

Answer 11

average cost pricing

Question 12

reduction in consumer and producer surplus when output is restricted to less than the optimum level

Answer 12

dead-weight loss

Question 13

where an identical good/service is sold to different customers at different prices for reasons not associated with costs

Answer 13

price discrimination

Question 14

when the discriminating firm can charge a separate price to each individual customer

Answer 14

first degree price discrimination

Question 15

when the discriminating firm can charge a separate price to different customer groups

Answer 15

second degree price discrimination

Question 16

when the discriminating firm can charge a different price in each country

Answer 16

third degree price discrimination