| What is a Pure Monopoly? | -This a Market with only 1 Supplier. Markets with more than 1 Supplier can also be called a Monopoly if it Dominates the Market |
| What is Monopoly Power?
-When is it arguably Most Powerful? | -This is when the Firm can Influence the Price of a Good in a Market.
-A Firm with Monopoly Power can Affect its Price (Price Making Power) and can happen in Pure Monopolies, Oligopolies or even Monopolistic Competition
-Goods which are Essential and has no Substitutes have the Greatest Monopoly Power. More Inelastic Demand a Product is, the Greater Monopoly Power present |
| How can Monopolies create a Market Failure and Misallocation of Resources? | -Usually, the Price and Output would be at a Point where Supply = Demand (AR = AC)
-Monopolies though can Misallocate Resources by Restricting Supply to create a Higher Price (MC=MR)
-This is Market Failure. Welfare Loss of KLM exists (Fewer Units left for Consumers to Purchase)
-Furthermore, Output being Restricted can lead to Economies of Scale being Less of an Impact. Productive Efficiency is not Achieved
-Monopolies experience Higher Costs of Production also exists as they may not have an Incentive to Innovate Market Production. They may not Cut Costs as they are Price Makers
-Finally, Choice is Restricted on Consumers, and their Wants and Needs will not be noted upon by the Firm, because Price Makers |
| What Benefits can Monopolies bring? | -Some Markets can Enjoy only having One Producer ie Energy Grids, which can Exploit the Economies of Scale and Produce Productive Efficiency
-The Large Economies of Scale can lead to a Lower Price being Charged as Costs of Productions fall. This also helps International Competition
-Monopolies use Profits to Innovate and make Better Quality Products for Consumers |
