- 1 Which one of the following is most likely to be a source of monopoly power?
- 2 Where do monopolies produce?
- 3 In which of the following ways is a monopoly beneficial to an economy?
- 4 Can a monopoly earn unlimited profits?
- 5 What are the 5 sources of market power?
- 6 What are the bases of monopoly power?
- 7 How a monopoly choose price and output?
- 8 Are monopolies efficient?
- 9 Why are monopolies bad?
- 10 Is monopoly good for society?
- 11 What are the advantages and disadvantages of monopoly market structure?
- 12 Is Monopoly bad for society?
- 13 Does a monopoly have market power?
- 14 When an industry is a natural monopoly?
- 15 What is the fundamental source of monopoly power?
Which one of the following is most likely to be a source of monopoly power?
The sources of monopoly power include economies of scale, locational advantages, high sunk costs associated with entry, restricted ownership of key inputs, and government restrictions, such as exclusive franchises, licensing and certification requirements, and patents.
Where do monopolies produce?
Monopoly Production: Monopolies produce at the point where marginal revenue equals marginal costs, but charge the price expressed on the market demand curve for that quantity of production.
In which of the following ways is a monopoly beneficial to an economy?
In which of the following ways is a monopoly beneficial to an economy? -With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers. – Monopoly profits give firms more reason to invest in the creation of new products through research and development.
Can a monopoly earn unlimited profits?
cannot earn unlimited profits.
What are the 5 sources of market power?
Factors influencing Market Power
- Number of competitors in a market.
- Elasticity of demand.
- Product differentiation.
- Ability of companies to make above “normal profit”
- Pricing power.
- Perfect information.
- Barriers to entry or exit.
- Factor mobility.
What are the bases of monopoly power?
The main essentials of monopoly power are as follows:
- (i) Ownership of essential raw material.
- (ii) Patent and research.
- (iii) State ownership.
- (iv) Public utilities.
- (v) Economies of scale.
- (vi) Unfair competition.
How a monopoly choose price and output?
The monopolist will select the profit-maximizing level of output where MR = MC, and then charge the price for that quantity of output as determined by the market demand curve. If that price is above average cost, the monopolist earns positive profits.
Are monopolies efficient?
MONOPOLY, EFFICIENCY: A monopoly generally produces less output and chargers a higher price than would be the case for perfect competition. Monopoly is inefficient because it has market control and faces a negatively-sloped demand curve. Monopoly does not efficiently allocate resources.
Why are monopolies bad?
The advantage of monopolies is an ensured consistent supply of a commodity that is too expensive to provide in a competitive market. An electric company is a good example of a needed monopoly. The disadvantages of monopolies are: Price fixing privileges that allow them to dictate prices, regardless of demand.
Is monopoly good for society?
The monopoly power of patent provides an incentive for firms to develop new technology and knowledge, that can benefit society. Also, monopolies make supernormal profit and this supernormal profit can be used to fund investment which leads to improved technology and dynamic efficiency.
What are the advantages and disadvantages of monopoly market structure?
Monopolies are generally considered to have several disadvantages (higher price, fewer incentives to be efficient e.t.c). However, monopolies can also give benefits, such as – economies of scale, (lower average costs ) and a greater ability to fund research and development.
Is Monopoly bad for society?
Monopolies over a particular commodity, market or aspect of production are considered good or economically advisable in cases where free-market competition would be economically inefficient, the price to consumers should be regulated, or high risk and high entry costs inhibit initial investment in a necessary sector.
Does a monopoly have market power?
Market Power = Ability of a firm to set a price for a good. Market power is also called monopoly power. A competitive firm is a “price taker,” so has no ability to change the price of a good. Each competitive firm is small relative to the market, so has no influence on price.
When an industry is a natural monopoly?
An industry is said to be a natural monopoly if one firm can produce the desired market demand at a lower cost than two (or more) firms can.
What is the fundamental source of monopoly power?
The fundamental cause of monopoly is barriers to entry. Barriers to entry have three sources: •Ownership of a key resource. The government gives a single firm the exclusive right to produce some good. Costs of production make a single producer more efficient than a large number of producers.