Abuse Of Monopoly Power

Question 1

When does monopoly power occur

Answer 1

Monopoly power occurs when a firm has market dominance in an industry. (for example, more than 40% market share). Abuse of monopoly power could involve setting higher prices or limiting output. Abuse of monopoly power can lead to deadweight welfare loss, less choice, and problems for suppliers.

Question 2

CMA

Answer 2

In the UK, the Competition and Markets Authority can investigate abuse of monopoly power and act against firms who are found guilty of abusing monopoly power

Question 3

Evidence of abusing monopoly power: high prices

Answer 3

Charging excessively high prices. This might be difficult to judge, but if they are making high profits then this is an indication that prices are higher than in a competitive situation

Question 4

Predatory Pricing

Answer 4

This involves cutting prices and selling below average cost to force rivals out of business.

Question 5

Limiting supply

Answer 5

Limiting production and access to technical developments. Artificial barriers to fair access.