Monopoly/ Non-Compettative Markets

Question 1

What is a monopoly?

Answer 1

a market structure with one dominant firm

Question 2

When does a monopoly occur?

Answer 2

when a firm owns over 25% of market shares of the market

Question 3

How does a monopoly occur?

Answer 3

when there are barriers to entry

Question 4

Name 5 barriers to entry

Answer 4

1. Economies of scale - smaller firms would have larger average costs making it difficult to compete
2. natural/ geographical barriers
3. brand loyalty
4. legal barriers
5. control of supplies

Question 5

Name 4 disadvantages of monopolies

Answer 5

1. high prices
2. productive inefficiency
3. pay suppliers low
4. diseconomies of scale

Question 6

name 3 benefits of competitive markets for consumers

Answer 6

1. great customer support
2. low prices
3. greater choice of goods/services

Question 7

name 2 disadvantages of competitive markets for consumers

Answer 7

1. goods/services can’t improve as firms can’t afford to invest
2. cannot benefits from econimes of scale