Yr 2 Monopoly Flashcards
What is a monopoly?
A company where they are the only sellers of a particular commodity.
Yeah but don’t get confused, whats monopoly power?
firms ability to charge a price higher than MC
Working monopoly?
Firms may have a high degree of monopoly power but they are in a definite oligopoly
What is a pure monopolist?
A firm that dominates the market, 100% concentration ratio
What is the concentration ratio?
A measure of market dominance
A dominant firm has what percentage of market share?
40% DAWGGGG
In a working monopoly, what percentage of the industry’s total sales do firms have?
> 25%
Draw the monopoly diagram showing supernormal profit and the deadweight welfare loss of the producer, consumer, and the monopoly :)
urm… check your book
Name some features of a monopoly, 3 should do :)
1) Monopoly has price-setting or price-making power
2) downward sloping of AR and MR curve
3) Price discrimination of consumers
4) Firms can either set prices or quantities, only 1 of them
Name some cases AGAINST monopolies……
Prices are higher than typical competitive conditions
loss of allocative efficiency as P>MC
Regressive effects on low-income dons
No market competition, so productive inefficiency
X inefficiencies, advertising spending
Monopoly grows bare, diseconomies of scale
What exactly is X inefficiency in a monopoly?
The average cost of production is higher than the AC boundary( on the curve you can show it)
Another economic case against monopoly can be shown as a graph showing monopoly profit, lets see it drawn ;)
Its in your god damn book idk how to draw on this
Economic case against monopoly AGAIN, this time, SPEW, what does it stand for….
S-Service-Lack of comp, does it affect the quality of service to consumers?
P-Prices- Prices are higher than the average comp market
E-Efficiency-Prodcutive?Allocative?Dynamic?
W-Welfare- Is there a loss of welfare on businesses dominated with monopoly power?(shown on diagram)
Finally, IDK who agrees with this but economic case FOR monopoly, but first, is high market concentration always seen as a monopoly?
NOO SIRR, it doesn’t always signal an absence of competition, it could just show how well a firm is doing and it is providing better quality goods, more efficiently than rivals :))
Okay now spit facts about why monopoly isn’t always bad
1) High monopoly profits used to fund investment+research
2) Natural monopolies have economies of scale
3) Domestic monopolies face global competition
4) Monopoly firms could be regulated….(industry regulator as a proxy for consumers)
5) Price discrimination could help some customers