Monopiles

Question 1

What are the characters of Monopolies?

Answer 1

-High barriers to entry
-Inelastic demand
-Profit maximiser(MR=MC)
-Price maker

Question 2

What is the definition of a pure monopoly?

Answer 2

A seller that can exploit economies of scale at all output levels and therefore have huge cost advantages over new firms as LRAC continuously fall.

Question 3

What are characteristics of a pure monopoly?

Answer 3

1- number of firms , high barriers to entry and exit , objective of a firm=> maximise profits MR=MC, price=> price makers, unique product

Question 4

What shape is the demand curve for monopolies and why?

Answer 4

Downward sloping as they are price makers

Question 5

What is the definition of a natural monopoly?

Answer 5

A seller that can exploit diseconomies of scale at all output levels and therefore has huge advantage costs over new firms as LRAC continuously fall

Question 6

What are characteristics of a natural monopoly?

Answer 6

High fixed costs as a proportion of total costs , these costs are ‘unrecoverable’. Natural monopolies seek to profit maximise producing at , MR=MC

Question 7

What are the positives of natural monopolies?

Answer 7

Falling ACs=> High profit margins , shareholder satisfaction, high SNP allows funds for dynamic efficiency, benefitting shareholders and consumers in LR.

Falling prices because of reduced LRAC, increasing consumer surplus.

Question 8

What are the negatives of natural monopolies?

Answer 8

High barriers to entry, restricting competition as well as slowing innovation. Maximum pricing imposed due to concentration ratio , reducing profit maximisation MR=MC

Question 9

How much percent of market share does a monopoly need to be considered one?

Answer 9

25%