1. What does monopoly mean?
2. What are four barriers to entry?
3. What barrier does Facebook enjoy?
4. How long is a patent good for?
5. How does a monopolist increase profits?
6. What is the difference between monopoly and perfect competition?
7. Why does marginal revenue decline faster than a price reduction?
8. Is there deadweight loss with a monopoly?
9. What is price discrimination?
10. Provide an example of price discrimination.
1. What does monopoly mean?
ReplyDeleteA situation in which a single company or group owns all or nearly all of the market for a given type of product or service, with no close substitutes.
2. What are four barriers to entry?
a) Government protection
b) Key resource
c) Network externalities
d) Economics of scale
3. What barrier does Facebook enjoy?
Network externalities.
4. How long is a patent good for?
20 years.
5. How does a monopolist increase profits?
By producing the output level at which marginal cost equals marginal revenue.
6. What is the difference between monopoly and perfect competition?
Monopoly has only one firm, the products are unique and the ease of entry is blocked. While prefect competition has many firms, identical products and the ease of entry is easy.
7. Why does marginal revenue decline faster than a price reduction?
.
8. Is there deadweight loss with a monopoly?
Yes.
9. What is price discrimination?
Selling the same good to different customers at different prices.
10. Provide an example of price discrimination.
Travel industry (airlines)
1. What does monopoly mean?
ReplyDeleteA firm that is the sole seller of a product without close substitutes.
2. What are four barriers to entry?
Government Protection
Key Resource
Network Externalities
Economies of Scale
3. What barrier does Facebook enjoy?
Network Externalities
4. How long is a patent good for?
20 years
5. How does a monopolist increase profits?
MR = MC
6. What is the difference between monopoly and perfect competition?
Perfect Competition: price taker
Monopoly: price maker
Perfect Competition: when increasing quantity of good there is one effect which is (output effect)
Monopoly: when increasing quantity of good there are 2 effects (output effect)&(price effect)
Perfect Competition: Price = MR=MC
Monopoly: Price > MR = MC
7. Why does marginal revenue decline faster than a price reduction?
because reduction in price effect on all units that we already have been sold
8. Is there deadweight loss with a monopoly?
YES
9. What is price discrimination?
Selling the same good to different customers at different prices
10. Provide an example of price discrimination.
Airline industry