Th3.4: ^^ Firms

Question 1

What do monopolists have the potential to do?

Answer 1

make huge profits for their shareholders through profit maximisation

Question 2

What does the existence of supernormal profits mean?

Answer 2

firms will have finance for investments and will be able to build up reserves to overcome short term difficulties

Question 3

What will firms with monopoly power be able to do?

Answer 3

compete against large overseas organisations

Question 4

What will large firms be able to maximise?

Answer 4

economies of scale, reducing costs and increasing profit further

Question 5

However, why might firms not always choose to profit maximise?

Answer 5

because of X-inefficiencies, sales or revenue maximising, profit satisficing or contestability leading to limit pricing

Question 6

What may the lack of competition mean in the long run?

Answer 6

that firms become complacent and so they may not make maximum profits