Monopoly

Question 1

What is a pure monopoly

Answer 1

when one firm has full control of the market with 100% concentration ratio

Question 2

What is a legal monopoly

Answer 2

a maximum of four firms in the market who have a concentration ratio of 25%

Question 3

What is a monopoly

Answer 3

a market structure where one firm has control over goods and services in a ,market

Question 4

two types of monopoly

Answer 4

pure and legal

Question 5

What are the assumptions of a monopoly

Answer 5

High barriers to entry
profit maximising
100%/25% concentration ratio

Question 6

What are barriers to entry

Answer 6

the difficulty and contestability of entering a Market

Question 7

What are examples of having high barriers to entry

Answer 7

Legal barriers( Patent, copyright,Trademarks)
Benefitting from internal economies of scale
Loyalty schemes
Anti competitive practices
Sunk costs

Question 8

what is a patent, copyright and trademark

Answer 8

patent: An exclusive right granted for an invention granted through legal application

Copyright: An automatic right which protects original literacy, music and artistic rights

Trademark: Protects logos and signs that are used in relation to a particular product of service

Question 9

What’s an incumbent firm

Answer 9

Firms already in the market

Question 10

What’s a sunk cost

Answer 10

costs that can’t be reclaimed or recovered
e.g wages, rent

Question 11

what are anti competitive practices

Answer 11

using vertical integration to stop other firms using its resources
e.g IKEA having their own wood

Question 12

What are the efficiencies on legal monopoly diagram

Answer 12

Dynamic efficiency- MC=MR Qmax using SNP to reinvest

Productive efficiency- MC=AC Qprod

Allocative efficiency- MC=AR Qallo

X inefficient anywhere above ATC, not using profit for right reasons

Question 13

Where do consumers want businesses to operate at

Answer 13

Qallo
no welfare loss
allocating resources efficiently

Question 14

What’s price discrimination

Answer 14

when a firm charges different consumer groups different prices for the same good

e.g buses, planes

Question 15

What are two types of demand on price discrimination

Answer 15

Elastic and Inelastic

Question 16

What is contestability like in monopolies

Answer 16

Low contestabilty in both

Question 17

What are monopolistic firms obj

Answer 17

Maximise profits

Question 18

How much regulation in monopoly

Answer 18

lots added in both but more in pure

Question 19

Are monopoly collusive

Answer 19

No collusive behaviour

Question 20

Societal Impact

Answer 20

Both negative
create a welfare loss

Question 21

Examples of pure monopoly

Answer 21

Royal Mail
ThamesWater

Question 22

Examples of legal monopoly

Answer 22

Apple

Question 23

What 3 things have to be drawn for price discrimination

Answer 23

Elastic diagram
Inelastic Diagram
Whole market

Question 24

What must happen to show why they price discriminate

Answer 24

Elastic+Inelastic>Whole Market
in regards to SNP

Question 25

Benefits on Monopoly to consumer

Answer 25

Can get high quality products Loyalty programs such as Tesco club card

Question 26

Drawbacks to consumer

Answer 26

High prices Little product improvements and changes Less Choice

Question 27

Benenfits to producers

Answer 27

Make higher SNP due to them being able to set prices Can take risks Price Discrimination High concentration ratio

Question 28

Drawbacks to producers

Answer 28

Regulation added Less incentive for research and development Negative press X inefficient

Question 29

Benefits to government

Answer 29

High SNP means more corporation tax Increased GOV REV Less unemployment High skilled labour

Question 30

Drawbacks to governments

Answer 30

Extra administrative costs to regulate Inequality with disproportion of income Welfare loss created