Exam3 - Flashcards(3)

Exam3 - Flashcards(3) - The flashcards are formatted for...

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Market Power Monopoly
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A firm that is the sole seller of a product without close substitutes. A firm’s ability to influence the market price of the product it sells.
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Barriers to Entry Market Power
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The key difference between a monopoly and a competitive firm. The main cause of monopolies.
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1. Single firm owns key resource 2. Govt gives single firm exclusive right to produce good 3. Natural monopoly 4. Government regulation Barriers to Entry
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Other firms cannot enter the market. Sources of barriers to entry:
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Single firm owns key resource Competitive Firm
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No barriers to entry. e.g. DeBeers owns most of the world’s diamond mines
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Copyright Patents; Copyright
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Examples of the government giving a single firm the exclusive right to produce the good. i.e. book, poem, movie
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Natural Monopoly Govt gives single firm exclusive right to produce good
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Encourages innovation; costly (wouldn’t do it if you couldn’t overturn the investment. A single firm can produce the entire market quantity at a lower average total cost (ATC) than could several firms.
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Government Regulation Government Regulation
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Exam3 - Flashcards(3) - The flashcards are formatted for...

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