Monopoly Flashcards
How many producers are there in a monopoly?
1
What market concentration/percentage share does a monopoly have to have to be a monopoly?
25% or more
What is the demand curve for a monopolist?
The market demand curve. downward sloping.
What is a Monopolists average revenue curve?
Its demand curve
What does marginal revenue look like for a monopolist?
Twice as steep as the AR curve
What do monopolists maximise and at what point does that occur?
Profit. Where MC = MR
Are Monopolists able to earn supernormal profit and why?
Yes. Average Revenue will be above the Average Cost at equilibrium output
How high are the barriers to entry in a monopoly?
High enough to stop any other firms entering the market
What are the two sources of Monopoly?
Barriers to Entry and Product Differentiation
What is one strategy monopolists can use to increase profit?
Price Discrimination
How do Monopolists price discriminate?
Time, Location, and level of Income.
What are the assumptions that must hold for price discrimination to work?
Elasticity of different buyers must vary.
The market must be split into distinct groups.
Must be able to cheaply keep groups separate.
