Monopoly Flashcards
1
Q
6 Sources of monopoly power
A
Barriers to entry and sunk costs Number of competitors Government creation Ownership of scarce resource or patent Mergers Predatory pricing
2
Q
In a monopoly market…
A
monopolists abuse their power by restricting output to MC=MR then charging a higher price of p1 creating supernormal profits. This reduces consumer surplus and adds a deadweight loss
3
Q
How monopoly markets can be justified
A
Supernormal profits can be reinvested to reduce MC and ATC
