Theme 3:3.4.5:Monopoly Flashcards
characteristics of monopoly
-one seller dominates market
-differentiated products
-high barriers to entry/exit
-imperfect information
-profit max
type of efficiencies in this market?
Dynamic in the SR and LR
monopoly diagram in the short run and long run
(same as oligopoly)
where is profit maximised ?
MC=MR
what is 3rd degree price discrimination?
when monopolists charge different prices to different consumers for the same good or service
example of 3rd degree price discrimination
peak and off peak train times
student and adult cinema ticket prices
when should price discrimination occur?
when they market is able to separate into groups of buyers
when should price discrimination occur?
when they market is able to separate into groups of buyers of different elasticities
in a monopoly
prevention of resale
examples of inelastic and elastic consumers in price discrimination
-inelastic-workers coming to London (have no choice)
-elastic-shoppers(can choose to shop elsewhere)
price discrimination diagram
pros of price discrimination for firms
-increased profits which can be invested into R&D
prod of price discrimination for consumers
lower prices for those who are elastic
increased equality due to more access
cons price discrimination consumers
some pay higher prices-loss of consumer surplus
grouping of consumers is not perfect
cons of price discrimination for firms
-increase in tranaction costs e.g checking ID and documents for age
