Monopoly

Question 1

What is monopoly

Answer 1

A monopoly is a market structure where a single seller or producer assumes a dominant position in an industry or a sector

Question 2

Monopoly are price makers or price takers

Answer 2

Price makers

Question 3

Why is it a natural monopoly

Answer 3

It is natural for only one firm to produce because they can produce at the lowest cost

Question 4

Name 4 pros of monopoly

Answer 4

1. Only one graph because the firm is the industry
2. The cost curves are the same
3. The MR = MC rule still applies
4. Shut down rule still applies

Question 5

Why are monopolies inefficient

Answer 5

1. Charge a higher price
2. Don’t produce enough (not allocative)
3. Produce at higher costs (not productivity)

They are not producing at the minimum ATC and not producing where the prices equals MC