CHAPTER TWELVE –MONOPOLY Flashcards
1
Q
Why do monopolies arise?
A
Main reason: Barriers to entry
- Legal market power
- Natural market power
2
Q
The relationship between price and total revenue arises from two effects:
A
The relationship between price and total revenue arises from two effects: 1.The quantity effect: the decrease in price that increase your quantity of goods sold. 2.The price effect: caused by the quantity effect, it refers to the loss in revenues due to the decrease in price.
3
Q
Ina monopoly, a firm will increase production until it reaches the point of
A
Ina monopoly, a firm will increase production until it reaches the point of MR = MC, reaching the optimal quantity
