Chapter 12 - Monopoly Flashcards
1
Q
Sources of Monopoly
A
- A key resource is owned by a single firm
- The government gives a single firm the exclusive right
- Natural monopolies
2
Q
AC and MC in natural and created monopolies
A
3
Q
Downsides of monopolies (price wise)
A
The monopoly is the sole producer of a good and faces downwards sloping demand and has to accept a lower price if it wants to sell more.
4
Q
Profit Maximisation for Monopolies
A
Optimal output (Q*): MR = MC
5
Q
The Welfare Cost of Monopoly
A
6
Q
Price discrimination
A
the business practice of selling the same good at different prices to different customers
7
Q
Perfect price discrimination
A
a situation in which the monopolist knows exactly the willingness to pay of each customer and can charge each customer a different price
8
Q
Perfect vs price discrimination
A
9
Q
Pricing for natural monopolies
A
10
Q
A
