3.4.5 - Monopoly

• What is a monopoly?

  A market structure with one dominant firm
• What does it mean for a firm to be a price maker?

  It can set prices above market equilibrium
• What are barriers to entry in a monopoly?

  Obstacles preventing new competitors
• What are some characteristics of a monopoly?

  High barriers to entry and unique products
• What is meant by economies of scale?

  Cost advantages due to increased output
• How do monopolies maximize profit?

  By producing where marginal cost equals marginal revenue
• What is supernormal profit?

  Profit exceeding normal profit levels
• What is deadweight loss in a monopoly?

  Loss of economic efficiency due to monopoly pricing
• How can monopolies lead to consumer exploitation?

  By limiting choice and raising prices
• What is the role of government regulation in monopolies?

  To prevent abuse of market power
• What are the impacts of monopolies on the market?

  • Higher prices for consumers
  • Limited product choices
  • Potential for inefficiencies
  • Need for regulatory assessment
• What are the types of barriers to entry in a monopoly?

  • Economies of scale
  • Legal barriers (patents)
  • Ownership of resources
  • Aggressive tactics (predatory pricing)