Monopoly

Question 1

LBCPP

Features of a Monopoly

Answer 1

1. Lack of substitutes
2. Barriers to entry
3. Competition
4. Price maker
5. Profits

Question 2

Only one firm produces a good without close substitutes.

Answer 2

Lack of substitutes

Question 3

If new firms enter the industry, the monopolist will not have complete control over a firm on the supply.

Answer 3

Barriers to entry

Question 4

Monopolist decides the price of the product.

Answer 4

Price Maker

Question 5

Can maintain supernormal profits even in the long run

Answer 5

Profits

Question 6

SER

Advantages of Monopoly

Answer 6

1. Stability of Prices
2. Economies of Scale
3. Research and Development

Question 7

There is only one firm that sets the market price.

Answer 7

Stability of Prices

Question 8

Big scale productions lower the cost per unit of seller which may be passed on the consumer.

Answer 8

Economies of Scale

Question 9

Customers may be getting a better quality product at a reduced price.

Answer 9

Research and Development

Question 10

HPI

Disadvantages of Monopoly

Answer 10

1. Higher prices
2. Price discrimination
3. Inferior goods and services

Question 11

It leads to exploitation of consumers as they have no option but to buy it from the seller.

Answer 11

Higher prices

Question 12

Monopolists can charge different prices on the same product for different consumers.

Answer 12

Price discrimination

Question 13

Monopolists may produce these as they know the goods will sell.

Answer 13

Inferior goods and services

Question 14

NLGPR

Types of Monopolies

Answer 14

1. Natural
2. Legal
3. Government
4. Patent
5. Resource

Question 15

These exist because the firm can provide the commodity at a lower cost per unit than potential entrants.

Answer 15

Natural Monopoly

Question 16

Example of a Natural Monopoly

Answer 16

Electric Companies

Question 17

These exist due to government legislation and protection.

Answer 17

Legal Monopoly

Question 18

These are privately-owned companies that are granted a monopoly by the government.

Answer 18

Legal Monopoly

Question 19

Example of a Legal Monopoly

Answer 19

Water service company

Question 20

It’s a monopoly that’s owned and operated by the government.

Answer 20

Government Monopoly

Question 21

What the difference between Legal Monopoly and Government Monopoly?

Answer 21

Legal Monopoly = private-owned
Government Monopoly = publicly owned

Question 22

It’s the protection of an invention under patent laws.

Answer 22

Patent Monopoly

Question 23

What’s the purpose of a patent monopoly?

Answer 23

To encourage research and development by ensuring a period of time over which the potential for monopoly exists.

Question 24

What is the lifespan of a Patent Monopoly?

Answer 24

Limited; It’s temporary

Question 25

It's when a single firm has virtual control over an entire resource's supply.

Answer 25

Resource Monopoly

Question 26

# EEPNG Sources of Monopoly Power

Answer 26

1. Exclusive control over important inputs 2. Economies of Scales 3. Patents 4. Network economics 5. Government licenses

Question 27

Total Revenue ÷ Quantity

Answer 27

Average Revenue

Question 28

It's represented by the demand in the market.

Answer 28

Average Revenue

Question 29

What is the monopolist's demand curve?

Answer 29

Market Demand Curve

Question 30

It's the revenue earned by selling one more unit.

Answer 30

Marginal Revenue

Question 31

In a monopoly, when can a firm sell more?

Answer 31

If it lowers prices

Question 32

Why can a monopolist choose the level of output or price but not both?

Answer 32

Because monopoly has a negatively sloped demand curve

Question 33

Does the marginal revenue curve has double the slope of the average revenue curve?

Answer 33

Yes.

Question 34

It is the tendency of monopoly firms to restrict output to increase prices and earn economic profits.

Answer 34

Monopoly underproduction

Question 35

It is measured by the price that customers are willing to pay for an additional output.

Answer 35

Marginal Social Benefit

Question 36

It is the result of a monopoly underproduction.

Answer 36

Deadweight Loss

Question 37

It is the inefficient allocation of resources.

Answer 37

Deadweight Loss

Question 38

It would cause social welfare to decline because mutually beneficial trade activity would fall.

Answer 38

Deadweight Loss

Question 39

Monopoly can result in a social loss if monopolist does not what?

Answer 39

Does not use cost-effective production methods

Question 40

Under monopoly, marginal cost is what?

Answer 40

Less than the price charged at the profit-maximizing level