Monopolistic Pricing Strategies
Discuss whether or not a monopoly will charge high prices.
Market Structures and Competition
Frequently asked question
- Definition of monopoly
- Importance of understanding why it might or might not be beneficial
II. Reasons why a monopoly might be beneficial
- High market power and ability to be a price maker
- Inelastic demand for its product due to lack of substitutes
- Ability to raise revenue by raising prices
- Maximizing profit
III. Reasons why a monopoly might not be beneficial
- Lack of competition resulting in higher costs and prices
- Low average cost of production due to economies of scale
- Not always a profit maximizer
- Product with elastic demand
- Fear of new firms entering the market and reducing market power
- Fear of government intervention
- Summary of reasons why a monopoly might or might not be beneficial
- Importance of considering both sides when analyzing a monopoly's impact on the market.
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