Monopoly

Question 1

Causes of monopolies:

Answer 1

Being the only owner of a crucial resource
Government policy
- Economic reasons (encourage R&D)
- Strategic reasons (armed services)
Natural Monopolies (economies of scale)

Question 2

If a monopolist wants to sell an extra unit of output, they must:

Answer 2

Reduce the price, which will also apply to all units they were previously selling

Question 3

Policies towards monopoly

Answer 3

Increasing competition through competition policy
Public ownership
Regulation
Doing nothing

Question 4

Third degree price discrimination is:

Answer 4

Based on a variety of characteristics, e.g.

• Geographic location
• Income
• Age

Question 5

Successful third degree price discrimination requires:

Answer 5

Identifiable consumer/groups with different willingness to pay for the product
An ability to prevent resale between consumers