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7 Cards in this Set
- Front
- Back
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What is the monopoly diagram? |
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What is the profit maximising level of output? |
MR=MC |
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What is the allocatively efficient level of output? |
Where MC=AR |
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What are the characteristics of a monopoly? |
Profit maximisation High barriers to entry High MES Price makers |
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What percentage of market share do monopolies have? |
25% |
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Benefits of a monopoly |
Earn supernormal profits so can invest more in R&D (Dynamic efficiency). More innovative as high barriers to entry so ideas are protected. High international competitiveness so generate large export revenue. Exploit economies of scale. High gov taxation. |
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Problems with monopolies |
Profit maximise not productively efficient leading to misallocation of resources. Have market power so can exploit consumers and charge higher prices, product is under consumed creating a market failure as they are not allocatively efficient. High producer surplus. Price discrimination. |
