Chapter 14 (1)

Question 1

Most firms = face some degree of competition

Answer 1

if a firm = faces NO competition at all –> therefore is able to have TOTAL control over how much it charges for its products

Question 2

MONOPOLY (single seller)

Answer 2

a firm that is the only producer of a good/service that has no close substitutes

Question 3

PERFECT MONOPOLY

Answer 3

controls 100% of the market in a product

Question 4

LARGE DEGREE OF MONOPOLY POWER

Answer 4

control slightly less than 100% of the market

► Beers: controls 80-90% of the diamond market

Question 5

the lack of a close substitute for a product = an essential part of the definition of monopoly

Answer 5

► Example: if you are a monopoly seller of water –> you can pretty much set your own price & people = would have no choice but to buy it

► seller of orange juice –> people would buy apple juice instead (if you set your price too high)