Introduction to Monopoly

The video explains the concept of monopoly, its power, and reasons for its development. It covers the definition of monopoly, the spectrum of market structures, and the concept of monopoly power, which allows firms to influence market prices. The video also discusses why monopolies develop, focusing on barriers to entry, product differentiation, government design, and economies of scale. It highlights how these factors contribute to the formation of monopolies and their ability to control markets.

What is the defining characteristic of a monopoly?

• Multiple sellers of a good

• A single seller of a good

• No sellers in the market

• Two sellers of a good

How does a monopoly differ from perfect competition?

• Monopolies have no sellers

• Monopolies have multiple sellers

• Monopolies are price takers

• Monopolies have a single seller

What is meant by 'monopoly power'?

• The ability to influence market prices

• The inability to influence market prices

• The inability to produce goods

• The ability to increase market competition

Why might a monopolist choose to reduce output?

• To decrease prices

• To increase prices and profits

• To increase market competition

• To reduce market share

What is a barrier to entry?

• An advantage for new firms

• A benefit for consumers

• An obstacle for existing firms

• An obstacle for new firms

How do patents act as a barrier to entry?

• They give a firm exclusive rights to produce a good

• They prevent any firm from producing a good

• They allow multiple firms to produce the same good

• They encourage new firms to enter the market

How can product differentiation lead to monopoly power?

• By making products identical

• By increasing the number of competitors

• By reducing consumer choice

• By creating unique products with no substitutes

What is an example of product differentiation leading to monopoly power?

• Standardized healthcare services

• Landing slots at major airports

• Multiple brands of crisps

• Identical train services

How can governments create monopolies?

• By introducing competition

• By reducing market regulations

• By encouraging new entrants

• By legislating exclusive rights

What is a natural monopoly?

• A market with multiple small firms

• A market where one firm can supply at lower costs

• A market with high competition

• A market with no economies of scale