Monopoly & Diagrams

studied byStudied by 0 people
0.0(0)
learn
LearnA personalized and smart learning plan
exam
Practice TestTake a test on your terms and definitions
spaced repetition
Spaced RepetitionScientifically backed study method
heart puzzle
Matching GameHow quick can you match all your cards?
flashcards
FlashcardsStudy terms and definitions

1 / 11

encourage image

There's no tags or description

Looks like no one added any tags here yet for you.

12 Terms

1

What are possible BTE in a monopoly?

  • EOS = low average costs due to high output

  • Natural monopoly = upfront investment/fixed cost may be large making it unprofitable for other companies

  • Legal and technical barriers = patents, copyrights for technology

  • Brand loyalty = if there have always been one firms, consumers may be reluctant to switch

  • Ownership/control of resources

New cards
2

Difference between AR and MR in monopoly

knowt flashcard image
New cards
3

Monopoly diagram

knowt flashcard image
New cards
4

• Consumer surplus: what is it?

Consumer / Producer Surplus

• Consumer surplus is quite easy to understand, since it’s the difference between how much someone is willing to pay for a given quantity of goods, an how much they actually pay.

•So if I would pay £10 and I pay £7 , I keep £3 to spend elsewhere and thus increase my welfare. So C S is a gain to society

New cards
5

Producer surplus:

  • Producer surplus is the difference between the price the producer is paid and the cost of production.

  • So If a producer could S at £6 but the Price is £11 they get an extra £5 of profit. Again a gain to society

New cards
6

Draw the diagram of monopoly, including the deadweight loss to society

  • so monopolies take surplus away from consumers and also reduces surpluses ( welfare) to society

<ul><li><p>so monopolies take surplus away from consumers and also reduces surpluses ( welfare) to society</p></li></ul>
New cards
7

What are the negative effects on consumers/ Govt / Economy of monopolies?

  • High Prices / low output (diagram)

  • Uses power to restrict market , stop competition by barriers to entry.

  • Poor quality due to no competition.

  • X – Inefficiency. – It is argued that a monopoly has less incentive to cut costs because it doesn’t face competition from other firms.Therefore the AC curve is higher than it should be.

  • P Discim

  • Consumer surplus fall

New cards
8

What are the positive effects on consumers/ Govt / Economy of monopolies?

• Secure jobs . Less likely to go under. But pushes small firms out (loses jobs)

• High supernormal profits reinvested into the firm for better goods in future (help consumers). Competitive firms can’t do this. Research & Development In many industries which require substantial investment – a competitive industry with many small firms would be unsuitable.

• High Corporation tax ( but some avoid eg Starbucks)

• Econ of Scale.... Lower Prices ??? or higher profits.(ME SHOW THIS)

• Modern economy... give people what they want ....ie massive tesco.

New cards
9

What is natural monopoly?

  • occurs when the most efficient number of firms in the industry is one.

  • A natural monopoly will typically have very high fixed costs meaning that it is impractical to have more than one firm producing the good.

  • An example of a natural monopoly is tap water.

New cards
10

Examples of Natural Monopolies

• Gas network

• Electricity grid

• Railway infrastructure

New cards
11

Draw a diagram for natural monopoly

knowt flashcard image
New cards
12
New cards

Explore top notes

note Note
studied byStudied by 18 people
899 days ago
5.0(1)
note Note
studied byStudied by 32 people
794 days ago
5.0(1)
note Note
studied byStudied by 1 person
28 days ago
5.0(1)
note Note
studied byStudied by 103 people
856 days ago
5.0(1)
note Note
studied byStudied by 3 people
761 days ago
5.0(1)
note Note
studied byStudied by 10 people
693 days ago
4.5(2)
note Note
studied byStudied by 39 people
953 days ago
5.0(1)
note Note
studied byStudied by 11 people
776 days ago
5.0(1)

Explore top flashcards

flashcards Flashcard (33)
studied byStudied by 3 people
792 days ago
5.0(1)
flashcards Flashcard (62)
studied byStudied by 5 people
765 days ago
5.0(1)
flashcards Flashcard (82)
studied byStudied by 10 people
56 days ago
5.0(1)
flashcards Flashcard (40)
studied byStudied by 5 people
171 days ago
5.0(1)
flashcards Flashcard (20)
studied byStudied by 115 people
507 days ago
5.0(1)
flashcards Flashcard (25)
studied byStudied by 12 people
468 days ago
5.0(1)
flashcards Flashcard (25)
studied byStudied by 2 people
661 days ago
5.0(1)
flashcards Flashcard (38)
studied byStudied by 38 people
8 days ago
5.0(1)
robot