Monopoly Flashcards
1
Q
Natural market power
A
1) The monopolist owns or controls the key resource necessary for production
2) there are economies of scale in production over the relevant range of output
2
Q
Legal market power
A
Patents, copyrights
3
Q
Network extranality
A
Occurs when a product’s value increases as more consumers begin to use it
4
Q
First degree price discrimination
A
A firm charges a buyer exactly his or her willingness to pay
5
Q
Second degree price discrimination
A
Consumers are charged different prices based on characteristic of their purchase, ex) quantity
6
Q
Third degree price discrimination
A
Occurs when a price varies based on the customers attributes
7
Q
Efficient/socially optimal price
A
Equals marginal cost
