Monopolies

Question 1

Pure monopolist

Answer 1

Is a single seller - 100% of market share. It is rare for a firm to have a pure monopoly - except when the industry is state owned and has a legally protected monopoly.

Question 2

Working monopoly

Answer 2

A working monopoly is any firm with greater than 25% of total sales.

Question 3

Oligopoly

Answer 3

Is characterised by the existence of a few dominant firms, each has market power and which seeks to protect and improve its position over time

Question 4

Duopoly

Answer 4

Two firms take the majority of demand

Question 5

How monopoly power can grow

Answer 5

Monopoly power can come from the successful organic (internal) growth of a business or through merges and acquisitions (integration)

Question 6

Horizontal integration

Answer 6

This is where two firms join at the same stage of production in one industry.

For example two car manufacturers may decide to merge.

Question 7

Vertical integration

Answer 7

This is where a firm integrates with different stages of production.

E.g. by buying its suppliers or controlling the main retail outlets.

Question 8

Forward vertical integration

Answer 8

Occurs when a business merges with another business further forward in the production chain

Question 9

Backward vertical integration

Answer 9

Occurs when a firm merges with another business at a previous stage of the supply chain

Question 10

Barriers to entry

Answer 10

Are designed to block rival businesses from entering a market profitably