Monopoly Flashcards
Characteristic(s): Barriers to entry
High
Characteristic(s): Number of firm(s)
One producer
Characteristic(s): Type of products
Unique product
Characteristic(s): Degree of knowledge
Imperfect knowledge
Types of BTEs (C.M.F.L.S.)
State C
Cost barriers (including EOS) (more of like during)
Types of BTEs (C.M.F.L.S.)
State M
Control of raw materials
Types of BTEs (C.M.F.L.S.)
State F
Financial barriers
more of like after
Types of BTEs (C.M.F.L.S.)
State L
Legal barriers
Types of BTEs (C.M.F.L.S.)
State S
Strategic entry barriers by rival firms
Why productive inefficient (firm’s POV)?
may not produce on LRAC due to X-inefficiency
→ producing above LRAC (higher than OC at Qe, equilibrium output where MR=MC)
Why productive inefficient (society’s POV)?
not likely to produce on min point of LRAC when maximising profits
Why allocative inefficient?
Charges a price that is greater than MC when maximising profits; and is likely to charge a very high price which increases the divergence between P and MC
Why dynamic efficient for contestable markets?
Have incentive
Why dynamic inefficient for non-contestable markets?
high BTE but no incentive
Why dynamic efficient?
Ability to innovate due to past accumulated LR normal profits because of high BTE
