MONOPOLY

Question 1

HOW MUCH MARKET SHARE DOES A NATURAL MONOPOLY HAVE?

Answer 1

A natural monopoly would have 100% market share as they are the only firm within the market.

Question 2

MONOPOLY MARKET SHARE?

Answer 2

A monopoly must have 25% or more market share to be represented as a monopoly.

Question 3

CHARACTERISTICS OF A MONOPOLY

Answer 3

➳High barriers to entry and exit
➳Product differentiation
➳Few competitors
➳Price makers
➳Monopsony power
➳Make SNP

Question 4

CHARACTERISTICS OF A MONOPOLY

Answer 4

➳High barriers to entry and exit
➳Product differentiation
➳Few competitors
➳Price makers
➳Monopsony power
➳Make SNP
➳Economies of Scale
➳High fixed costs

Question 5

MONOPOLY EFFICIENCIES?

Answer 5

➳Dynamic Efficiency
➳They are not productively or allocative efficient as they are described as ‘over-rewarded’ Not allocatively efficient as do not operate at the bottom of the AC curve.
➳X-Inefficient

Question 6

NATURAL MONOPOLIES

Answer 6

➳Governments might be reluctant to them as might become inefficient.
➳They happen usually due to it making no sense for there to be more. For example the water pipes, this is because it makes no sense for there to be separate pipes.
➳High fixed costs
➳Have continuous economies of scale

Question 7

THIRD DEGREE PRICE DISCRIMINATION

Answer 7

This is when a firm charges different prices for the same product in different segments of the market, e,g;
➳Age
➳Times
➳Places
Group A and B with different price elasticities of demand (PED)- graph.
To maximise profit they would set price at MC=MR

Question 8

PRICE DISCRIMINATION FOR MONOPOLIES

Answer 8

➳Results in an increased revenue for the seller
➳The customers may have to pay higher prices due to brand recognition