Monopoly

Monopoly power is...

• When one firm has the potential power to behave like a monopoly

• When one firm is the entire industry

• When one firm has a market share of over 30%

• Where there is one dominant firm in the market with a share of over 90%

Which of the following is NOT a characteristic of a monopoly?

• Differentiated products

• High barriers to entry and exit

• Imperfect information

• Price taker

Which of the following is not a barrier to entry but could create a monopoly situation?

• Economies of scale

• Owning a resource

• Marketing

• Merger

Monopolies are profit maximisers so produce output where

• MR=MC

• AR=MC

• Supply=Demand

• Price=MC

They generate supernormal profits because...

• Their AR curve sits above their AC curve

• Their AC curve sits above their AR curve

• AR=AC

• They operate in the short-run

As they are price makers, they...

• Set prices according to the demand curve

• Have a horizontal demand curve

• Have identical AR AND MR curves

• Set any price they choose

They set prices whereby...

• Price>MC

• Price<MC

• Price=MC

• Price=MR

Which statement is true?

• Monopolies are statically inefficient but dynamically efficient

• Monopolies are statically and dynamically efficient

• Monopolies are only allocatively inefficient

• Monopolies are not efficient in any way

Consumer surplus is...

• The additional benefit a consumer gains because they pay less for a product than what they were willing to

• The additional benefit a producer gains because they pay less for a product than what they were willing to

• The loss of consumer benefit when a firm prices higher than they ought to

• The value a consumer places on one unit of a good

When Price>MC...

• It is a signal that firms should increase output until Price=MC

• A firm is unlikely to be generating supernormal profits

• A good is being overconsumed

• Allocative efficiency is achieved