Market structure

Question 1

Characteristics of a monopoly

Answer 1

Firm= industry
products highly differentiated 
imperfect information 
Sup norm profits in the LR
Price makers

Question 2

Monopoly bad

Answer 2

Statically inefficient - P>MC AC not min
X-inefficent lack incentive to control ac
Market failure, under allocation of resources, consumer- producer surplus

Question 3

Monopoly good

Answer 3

Dynamically efficient LR sup profits investment
Economies of scale lover LRAC over time
good for natural mon, high fixed costs large MES

Question 4

Monopoly power

Answer 4

more than 25% of market share

Question 5

Benefits of a Collusive oligopoly

Answer 5

Game theory able to maximise joint profits, both earn more individually than Nash equilibrium 
Gets rid of uncertainty 
Act as a monopoly 
High super norm profit 
Economies of scale 
Dynamic efficiency

Question 6

Conditions of a collusive oligopoly

Answer 6

Similar cost structures- easy to organise pricing strategies
High brand loyalty, consumer inertia- reduce incentive of cheating, undercutting
High barriers to entry, low contestability - sup norm profit may attract competitors into market so ensures benefits in LT
Small number of firms- easier to organise