Chapter 5 : Perfect competition, imperfectly competitive markets and monopoly Flashcards
1
Q
What is a monopoly?
A
When there is only one firm in the market with more than 25% of the market share.
2
Q
What assumptions do economists make to model a monopoly?
A
- high barriers to entry
- profit maximisers they produce when MC=MR
- one firm in the market
3
Q
What is a pure monopoly?
A
When there is only one firm in the market.
4
Q
What is a legal monopoly?
A
When one firm has 25% of the market share.
5
Q
What is a legal barrier?
A
A legal barrier that stops entry to a market.
Ex. patents
6
Q
What is a sunk cost?
A
When you leave a market you cannot recover any costs.
Ex. Specialist machinery, advertising
