monopolies Flashcards
what what are the 4 sources of monopoly power?
legal market power
natural market power
control of key resources
economies of scale
what is legal market power?
legal rights that give someone power and economic profit and to produce the item
what is an example of legal market power?
patents and copyrights
what is natural market power?
the power that arises when a single firm can efficiently produce the entire output of a market at a lower cost than multiple firms
what is an example of natural market power?
economies of scale allows the firm to produce more and for a cheaper price as they produce more and they can set the price at whatever they want
what is control of key resources?
controlling resources that are key for the production of a good
what is an example of control of key resources?
owning Dimond mines, you control the main resource of that good and no one else can get that good anywhere else
what is economies of scale?
when you are able to achieve lower production costs as production output increases
what is an example of economies of scale?
a firm who provides electricity is able to provide electricity for cheaper if they provide electricity to more people because the cost of their infrastructure is amortized
under monopolies, is MR=MC=P?
no since MR is different than price because the price can be set by the monopoly
when you produce more more goods, what much the monopoly do to price?
they must sell all units at the new price
is marginal revenue more or less than price in a monopoly?
it is always less than price
is there deadweight loss in a monopoly when the price moves from market price to the monopoly price?
yes
