mono,oligo,key terms etc

Question 1

What is a monopoly?

Answer 1

A sole producer of a good or service. Could be in a country as a whole or in some area of
the country
Legally, a monopoly exists when one provider has at least 25% of the market share

Question 2

Monopolies exist because of BARRIERS TO ENTRY including:

Answer 2

Legal ones e.g. only Royal Mail can deliver letters to
your home

Greater efficiency than potential rivals due to very large
economies of scale (reduced costs for larger producers)

Location, so that even small firms can be monopolies
e.g. village shop

Copyrights and patents

Question 3

Can monopolies set the price?

Answer 3

Unless a government regular prevents it, monopolies can set either the price or the quantity of products in the market.
If a monopoly sets the price, then consumers will decide how much they wish to buy at that price and therefore how much will be supplied.
The same idea works for a monopoly that offers a set amount. The price will be set by the amount
consumers are willing to demand

Question 4

What is a oligopoly?

Answer 4

Where a small number of firms
control the large majority of
market share
-Exists if the 5 largest firms
have 50% or more of the
market

Question 5

While oligopolies will have barriers to entry, they are usually not sufficient to prevent other firms _____ the market and increasing competition e.g. Aldi and Lidl entering the UK supermarket market.
Oligopolies often try to control the market through _______: that is they get together and agree t set the price so that they avoid price competition.
This is illegal in the UK

Answer 5

entering

collusion

Question 6

How do monopolies and oligopolies differ from

competitive markets?

Answer 6

Firms are often much larger

Its assumed that monopolies will charge a higher price

Produce a smaller quantity than firms in a
competitive market and as a result gain large
economies of scale. This allows it to have lower costs
and therefore, be able to charge a lower price

Question 7

Key terms

Answer 7

Productivity

A measure of the efficiency of a person, machine, factory or system
i.e. how good are they at turning inputs into outputs

Automisation

The use or introduction of automatic equipment in a manufacturing
or other process or facility

Innovation

The process of translating an idea or invention into a good or service
that creates value, or for which customers will pay

Barrier to entry

Barriers to entry are designed to block potential entrants from
entering a market profitably e.g. cost or brand loyalty

Government
regulator

Is a public authority or government agency responsible for exercising
authority over some area of human activity in a regulatory or
supervisory capacity e.g. gas and eclectic OFCOM and water OFWAT

Copyright &
patent

Copyright is legal protection against copying for authors, composers
and artists. A patent provides a right under law to produce and
market a good for a specified period of time e.g. pharmaceuticals