Monopoly 1 – Flashcards
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Example of a barrier to entry?
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1. Key resource owned by a single firm
2. COP make a single producer more efficient than a large number of producers.
3. the gov has given the existing monopoly the exclusive rights to produce the good
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Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often
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1. not in the best interest of society
2. one that fails to maximize total economic well-being
3. inefficient
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The defining characteristic of a natural monopoly is
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economies of scale over the relevant range of output
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Authors are allowed to be monopolists in the sale of their books in order to
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encourage authors to write more and better books
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Because many good substitutes exists for a competitive firm's product, the demand curve that it faces is
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perfectly elastic
