Econ 1738

Question 1

Define pure monopoly and describe its characteristics.

Answer 1

1. Pure monopoly exists when a single firm is the sole producer of a product for which there are not close substitutes.
   - Single seller
   - no close substitute
   - price makers
   - blocked entry
   - non-price competition

Question 2

List and briefly discuss the barriers to entry associated with monopoly.

Answer 2

• Economies of scale and pricing…
• they’ll make a profit
• the other firm will drop the price.
• Natural Monopoly:

Question 3

Why is MR<P in monopoly? Does MR=MC rule still apply to monopolies?

Answer 3

IDK

- MR=MC only tells us the optimal level of production

Question 4

In the long run, how does a monopoly compare to pure competition with regard to price and output?

Answer 4

Monopolies charge higher prices and produce less than pure competition.

Question 5

In the long run, will an unregulated monopoly achieve productive efficiency? Allocative efficiency?

Answer 5

NO

NO

Question 6

Why might the government decide to regulate a monopoly? List and describe the 2 basic regulation choices.

Answer 6

? They are making an economic profit ??

Question 7

What is natural monopoly?

Answer 7

If the market demand curve intersects the long run ATC curve at any point where ATCs are declining.