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Micro Economics Y2 > Monopoly > Flashcards

Monopoly Flashcards

1
Q

Working monopoly

A

25%

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2
Q

Dominant monopoly

A

40%

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3
Q

Pure monopoly

A

100%

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4
Q

Natural monopoly

A

When completion is unfeasible

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5
Q

Pure monopolists will

A

Profit maximise

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6
Q

Allocative efficiency

A

MC=AR

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7
Q

Productive efficiency

A

MC=AC

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8
Q

Assumptions of pure monopolies (6)

A

• Ho: Unique products
• No: High BTE
• Per: Imperfect knowledge
• Nor: SNP in LR
• Man: One buyer, many sellers
• Price: Price makers

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9
Q

Economic case against monopoly (4)

A

Service: DOS
Prices
Efficiency: not AE or PE, limits output
Welfare: less incentive to invest

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10
Q

Advantages of monopolies (5)

A

• Reinvestment
• Natural monopolies (EOS)
• Easier to compete internationally
• Regulated CMA (proxy competitor: watch dog)
• Price discrimination

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11
Q

Price discrimination

A

Charging consumers different prices for reasons not associated with costs

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12
Q

Conditions for price discrimination (3)

A

• Sufficient monopoly power
• ID’ing market segments
• Ability to prevent re sale

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13
Q

Aims of price discrimination (3)

A

• Increase revenue
• Increase profits
• Use up spare capacity

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14
Q

Types of price discrimination (4)

A

1st degree: perfect pricing (bartering)
2nd degree: price varying on Q sold
3rd degree: group discrimination
Hurdle model

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15
Q

Hurdle model (4)

A

• Delay a purchase
• Risk not getting the product
• Discount if the product is 2nd hand
• Discounts may require customers to collect and redeem coupons

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16
Q

Against price discrimination targeting (4)

A

• Exploitation: majority still paying more than MC
• Extracts consumer surplus turned into higher producer surplus
• Possible use of discrimination as limit pricing tactic/ BTO
• If successful it reinforces the monopoly power of existing firms

17
Q

Cross subsidising (4)

A

• Charge high prices at peak times to subsides off-peak times
• Better use of spare capacity: less waste
• Brings in new consumers into market who would have otherwise excluded a ‘normal higher price’
• Use of monopoly profit for research this is a stimulus to innovation/dynamic efficient gains

Micro Economics Y2 (12 decks)

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