4.5 Monopoly Flashcards
1
Q
Key Assumptions
A
- One dominant firm
- Very high barriers
- Price Makers
2
Q
What is a working monopoly?
A
Over 25% market share
3
Q
What is a dominant firm?
A
At least 40% market share
4
Q
Example of firms?
A
- British Gas has 30% share
- Amazon has 27% share
5
Q
What is a natural monopoly?
A
Situation where there can’t be more than one productively efficient provider
6
Q
Natural monopoly diagram?
A
7
Q
Conditions for price discrimination?
A
- Sufficient price setting power
- Identify market segment PEDs
- Identify different group behaviours
8
Q
Main aims of price discrimination?
A
- Increase total revenue
- Increase market share
- Build customer loyalty
9
Q
What is 1st degree PD?
A
Charge different prices for individuals
10
Q
What is 2nd degree PD?
A
Prices vary by quantity sold and time of purchase
11
Q
What is 3rd degree PD?
A
Charge different prices to different groups depending on PED
12
Q
Economic efficiencies?
A
- X Allocative
- X Productive
- X-inefficiency
13
Q
Advantages of PD?
A
- Potential for social benefit
- Make use of spare capacity
- New customer
14
Q
Disadvantages of PD?
A
- Lost consumer welfare
- Reinforced monopoly power
15
Q
Advantages of a Monopoly?
A
- Investment = Dynamic
- Economies of scale
- Face global competition
16
Q
Drawbacks of a Monopoly?
A
- Low economic efficiency
- Higher prices
- Price Discrimination
- Lack of choice
