Types of Monopolies
What is a natural monopoly?
When one company can produce goods or services cheaper than several others
How many firms are in a monopoly market?
Only one.
Is a monopoly a price taker or price maker?
Price maker.
Are barriers to entry high or low in a monopoly?
High
Name one advantage of a monopoly.
Economies of scale or stable prices.
What is a pure monopoly?
When one company is the only seller of a product with no close substitutes.
Does a monopoly have competition?
No
Why can a monopoly set its own prices?
Because there are no close substitutes or competitors.
Give one example of a barrier to entry.
Patents, high start-up costs, or government laws.
Name one disadvantage of a monopoly.
High prices or lack of choice.
What is a public monopoly?
When the government is the only provider of a good or service.
What makes a monopoly different from perfect competition?
Monopoly has one firm; perfect competition has many.
Who benefits more from monopoly pricing — consumers or producers?
Producers
What is meant by a “legal monopoly”?
A monopoly protected by law
Why might consumers dislike monopolies?
Less competition = higher prices and less innovation.
Give one example of a natural monopoly.
Water, electricity, or rail services.
Who decides production levels in a monopoly?
The single firm.
What happens to prices when competition is low?
Prices usually increase.
What happens to new firms trying to enter a monopoly market?
They are blocked or discouraged.
Why might governments support some monopolies?
They provide essential services efficiently
Why might the government allow a natural monopoly to exist?
monopoly to exist?It’s more efficient for one company to provide the service.
What term describes when one company dominates an entire market?
Monopoly
What can the government do to stop unfair pricing by monopolies?
Regulate prices or enforce antitrust laws.
Why are barriers to entry important in creating monopolies?
They prevent competition from forming.
Who benefits from monopoly profits?
The firm, not the consumer.