Monopoly

Question 0

What happens to a monopoly’s profit in the long run?

Answer 0

No change due to high barriers to entry

Question 1

What is a legal monopoly?

Answer 1

When a firm’s market share occupies 25%+ of the market

Question 2

What conditions are needed for price discrimination?

Answer 2

Ability to seperate the market
Sub groups have different peds
Production costs the same for sub groups

Question 3

What are 3 ways to seperate the market in order for price discrimination?

Answer 3

Different times
Different locations
Different incomes

Question 4

What are 3 positive aspects of price discrimination?

Answer 4

More revenue
Some consumers pay less than without price discrimination
Firm may use profits to become dynamically efficient

Question 5

What are two negatives of price discrimination?

Answer 5

Consumers with inelastic demand will pay higher prices

Form may use predatory pricing

Question 6

What are the positives of a monopolist?

Answer 6

Could become dynamically efficient
May be a natural monopoly
Consumer benefits from economies of scale

Question 7

What are the negatives of a monopoly

Answer 7

Firms may become inefficient due to lack of competition
Possible unfair prices
Lower quality goods due to lack of competition