CH 20 Monopoly

Question 1

What is a monopoly?

Answer 1

A situation where there is one dominant seller in the market

Question 2

What are the features of a monopoly?

Answer 2

-One business dominates the market
-It sells a unique product, that nobody would have an exact copy of
-They are the price maker
-High barriers to entry

Question 3

What are price makers?

Answer 3

Where a dominant business is able to set the price charged in the whole market

Question 4

What are the main barriers to entry?

Answer 4

-Legal barriers
-Patents
-Marketing budgets
-Technology
-High start-up costs

Question 5

What are patents?

Answer 5

A license that grants permission to operate as the sole producer of a newly designed product

Question 6

What are the advantages of a monopoly?

Answer 6

-Higher efficiency
-More innovation
-Firm can enjoy economies of scale

Question 7

What are the disadvantages of a monopoly?

Answer 7

-Consumers have to endure higher prices
-Consumers have restricted choice
-Lack of innovation
-Innefficiency