monopoly Flashcards
1
Q
characteristics of a monopoly
A
- Single/ dominant seller
- Profit maximising
- Price maker
- High barriers
- Price discrimination
2
Q
Third degree price discrimination
A
- Different groups of consumers are charged different prices for the same good
- E.g. peak/ off-peak, children, students, adults
- The demand elasticity for each group is different
- For this to be effective it must not cost the monopoly much to split the market
- Maximise overall profits
3
Q
Costs and benefits of monopoly on consumers
A
Costs:
- Loss of consumer surplus
- Since P>MC there is a loss of allocative efficiency
- Higher prices in the long-run
