Market failure in Monopolies

Question 1

Learn the difference between monopolies and monopoly power

Answer 1

1. pure monopoly
2. monopoly power
3. firms providing essential goods

Question 2

Monopolies cause market failure and the misallocation of resources

Answer 2

LOOK AT DIAGRAM AND PAGE 87
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Question 3

Monopolies can being Benefits to an Economy

Answer 3

1. in some markets most efficient way of allocating resources = one producer
2. large firms can exploit large economies of scale
3. monopolies use their profits for research into innovation and new production methods
   LOOK AT GRAPH PAGE 87