Chapter 9

Question 1

When does a pure monopoly exist? (3)

Answer 1

1. There is one seller in the market with no close substitutes for their good or services
2. Seller has considerable control over price, (monopolist is a price maker/ price searcher)
3. Barrier to entry to protect monopolist from potential competitors

Question 2

5 Entry Barriers in Monopolies

Answer 2

1. Economies of Scale
2. Patents and Copyright
3. Exclusive control over a necessary input
4. Public franchies
5. Strategic Barriers

Question 3

1. Economies of Scale (Barrier)

Answer 3

large firms has lower per unit costs (natural monopoly)

Question 4

Patents

Answer 4

develop has complete control over the duration of the patent

-in canada patents last for 20 years

-patents are rewards for innovation

-patents require the release of complete disclosure of ingredients

Question 5

Copyrights

Answer 5

intellectual property such as books, music, movies art

Question 6

3. Exclusive control over a necessary input
4. Public franchies
5. Strategic Barriers

Answer 6

3. Exclusive control over a necessary input (like control over aluminum)
4. Public Franchies (government gives exclusive control to a single firm like the Hudsons bay)
5. the firm makes entry barriers

Question 7

monopolist demand curve

Answer 7

downwards sloping

Question 8

where does a monopolist maximize profit

Answer 8

where MR = MC