Monopoly

Question 1

Features

Answer 1

Only one firm, complete barriers to entry/exit, firm is a price maker

Question 2

productive efficiency ?

Answer 2

No, they opperate at short run profit max so Q is not lowest point of LRAS

Question 3

Allocative efficiency ?

Answer 3

No, Q is where P>MC

Question 4

Dynamic efficiency ?

Answer 4

Eh, there are the means for dynamic efficiency but perhaps not the incentive

Question 5

Why don’t gov have windfall tax on all supernormal profit ?

Answer 5

Politically unpopular, creates black markets, takes away incentive for the firm

Question 6

deadweight loss

Answer 6

loss of welfare arising from a market failure

Question 7

why is there deadweight loss in monopoly if it results in loss in producer and consumer welfare ?

Answer 7

Supernormal profit > firms deadweight loss

Question 8

Why are monopolies desirable ?

Answer 8

Means for dynamic efficiency, internationally competitive, large enough to benefit from economies of scale, makes sense for natural monopoly