CH11:Pure monopoly

Question 1

What is pure monopoly?

Answer 1

when there is a single seller of a unique product with no close substitutes.

Question 2

What are the characteristics of pure monopoly?

Answer 2

Single seller
Barriers to entry
No close substitutes
Non-price competition
Price makers

Question 3

What is X-inefficiency?

Answer 3

When a product is produced at a higher average and total cost than necessary for the level of output.

Question 4

What is the network effect?

Answer 4

When the value of product increases as more consumers use it.

Question 5

What are barriers to entry in monopoly?

Answer 5

Network effects- firms will large n.o of users will attract more consumers leaving small firms to die.
Pricing-firms may lower prices and increase
Economies of scale
Ownership of resources

Question 6

What are legal barrier to entry?

Answer 6

Patents
Licensing

Question 7

What should a monopolist do to increase profit?

Answer 7

lower the price of the product

Question 8

Where will a monopolist produce for profit maximization?

Answer 8

When MC=MR

Question 9

Does monopolist have efficiency?

Answer 9

No, they have neither allocative or productive efficiency.