Monopoly Flashcards
What are the characteristics of a monopoly?
One buyer, loads of suppliers High start up costs High barriers to entry Price maker Price inelastic demand Lack of substitutes non-price competition
What is a Natural Monopoly?
is type of monopoly that exists due to high start up costs or large economies of scale
Does monopoly result in allocative efficiency?
no, they have super normal profits as they can afford to produce whatever they need
Does monopoly result in productive efficiency?
no, they don’t produce at the lowest average cost
Does monopoly result in dynamic efficiency?
yes, they have super normal profits so they can invest back into technological changes and changes to production
Does monopoly result in X-efficiency?
no, have no incentive to minimize costs
What are the advantages of monopoly to consumers?
high quality goods
What are the disadvantages of consumers?
high prices
What are the advantages of monopoly to firms?
higher revenue, supernormal profits
What are the disadvantages of firms?
depends on consumers choice to spend or not
What are the advantages of monopoly to employees?
satisfycing
What are the disadvantages of employees?
(suppliers) employees could be made redundant
What are the advantages of monopoly to supplier?
fixed contracts
What are the disadvantages of supplier?
loss of revenue and low exploited
