Yr 2 Monopoly Flashcards

1
Q

What is a monopoly?

A

A company where they are the only sellers of a particular commodity.

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2
Q

Yeah but don’t get confused, whats monopoly power?

A

firms ability to charge a price higher than MC

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3
Q

Working monopoly?

A

Firms may have a high degree of monopoly power but they are in a definite oligopoly

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4
Q

What is a pure monopolist?

A

A firm that dominates the market, 100% concentration ratio

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5
Q

What is the concentration ratio?

A

A measure of market dominance

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6
Q

A dominant firm has what percentage of market share?

A

40% DAWGGGG

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7
Q

In a working monopoly, what percentage of the industry’s total sales do firms have?

A

> 25%

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8
Q

Draw the monopoly diagram showing supernormal profit and the deadweight welfare loss of the producer, consumer, and the monopoly :)

A

urm… check your book

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9
Q

Name some features of a monopoly, 3 should do :)

A

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

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10
Q

Name some cases AGAINST monopolies……

A

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

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11
Q

What exactly is X inefficiency in a monopoly?

A

The average cost of production is higher than the AC boundary( on the curve you can show it)

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12
Q

Another economic case against monopoly can be shown as a graph showing monopoly profit, lets see it drawn ;)

A

Its in your god damn book idk how to draw on this

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13
Q

Economic case against monopoly AGAIN, this time, SPEW, what does it stand for….

A

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)

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14
Q

Finally, IDK who agrees with this but economic case FOR monopoly, but first, is high market concentration always seen as a monopoly?

A

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 :))

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15
Q

Okay now spit facts about why monopoly isn’t always bad

A

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

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16
Q

Examples of Natural monopolies?

A

Utilities - especially distribution

E.G - water, gas/electricity, internet, railway

17
Q

What characteristics define Natural monopolies?

A

Huge fixed costs, especially start-up costs. (Rail track infrastructure is expensive.