LS20 - Max and Min Prices

Question 1

What makes a firm qualify as a legal monopoly?

Answer 1

25% of the market shares are earned by the firm

Question 2

What happens when a firm owns over 50% of the market shares?

Answer 2

It becomes a market leader/dominant player. They then dominate:
Price (sales)
Other firms
Quantity Produced

Question 3

What happens when a maximum price is set?

Answer 3

A price set below the market equilibrium price by the government causing excess demand

Question 4

What happens when a minimum price is set?

Answer 4

A price set above the market equilibrium price by the government causing excess supply

Question 5

When is maximum price used?

Answer 5

Electric and Fuel Bills, Rent
These are put in for necessities to prevent prices from rising too high

Question 6

When is minimum price used?

Answer 6

Farmers, Fair Trade, Wage
Put in to guarantee income
Alcohol, Cigarettes
Put in to limit externalities