Monopoly

Question 1

Monopoly

Answer 1

A firm that sells a product to the entire market (no competition)

Question 2

Characteristics of a monopoly

Answer 2

barriers to entry
can restrict output
no worry about competitors

Question 3

Why do monopolies exist?

Answer 3

Because of barriers of entry

Question 4

What are the legal barriers of entry

Answer 4

1. Laws
2. License
3. Copyright or patent

Question 5

What are the natural barriers of entry

Answer 5

when the cost of entry is prohibiting
1 firm has exclusive control of an input to producing a product

Question 6

What is a natural monopoly?

Answer 6

Exists due to prohibited costs of entry for 1 firm has exclusive control of inputs to produce the good of 1 product or 1 product is so superior no other firm can compete

Question 7

Do monopolies have absolute market power?

Answer 7

Yes, they decide on both price and quantity

Question 8

How efficient are monopolies?

Answer 8

They are allocative inefficient and technically efficient

Question 9

What is technical efficiency

Answer 9

when a market uses inputs and commodities to minimize costs

Question 10

monopoly gain

Answer 10

when the government breaks up monopolies and transfer monopoly gain back to consumers

Prevents price from falling to the level of costs