Monopoly (OCR A-Level Economics): Flashcards
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Practise the cards
15 cards from this deck
Market structure with single firm as sole seller
Market structure with single firm as sole seller
Monopoly
Efficiency from innovation & R&D investment over time
Efficiency from innovation & R&D investment over time
Dynamic efficiency
Higher costs than necessary due to lack of competition
Higher costs than necessary due to lack of competition
X-inefficiency
Why do monopolies earn supernormal profit in long run?
Why do monopolies earn supernormal profit in long run?
High barriers to entry prevent new firms entering
Firm that controls price by altering quantity supplied
Firm that controls price by altering quantity supplied
Price maker
Profit maximisation condition for monopolist
Profit maximisation condition for monopolist
Is a monopolist productively efficient?
Is a monopolist productively efficient?
No, doesn't produce at lowest possible average cost
Is a monopolist allocatively efficient?
Is a monopolist allocatively efficient?
No, sets price above marginal cost ()
Charging different prices to different consumers
Charging different prices to different consumers
Price discrimination
Type of price discrimination: different prices to different consumer groups
Type of price discrimination: different prices to different consumer groups
Third-degree price discrimination
Single firm supplies entire market at lower cost
Single firm supplies entire market at lower cost
Natural monopoly
What prevents firms entering a monopoly market?
What prevents firms entering a monopoly market?
Barriers to entry
Position of MR curve relative to demand curve
Position of MR curve relative to demand curve
MR lies below demand curve
3 conditions needed for price discrimination
3 conditions needed for price discrimination
Market power, market segmentation, no arbitrage
Why natural monopoly has lower average costs as output rises
Why natural monopoly has lower average costs as output rises
Economies of scale