1 What are the main features characteristics of a monopoly D

1. What are the main features (characteristics) of a monopoly? Describe them.

2. Explain how economies of scale can be a barrier to entry. Also provide some examples of monopolies.

3. What are the main characteristics of Monopolistic Competition? Describe them.

4. What is Oligopoly?

5. Compare Oligopoly to Perfect Competition in terms of price and profit.

Solution

The monopolists face a downward sloping demand curve which means that the monopolist can sell more if he reduces the prices. The monopolist is a price maker. The monopolist practices price discrimination, i.e., selling the same good to different groups of customers at different prices.

2 Monopolies are essential especially in public utilities like water, electricity since too many producers will be inefficient. The infrastructure cost is very high so it is a barrier to entry. Examples of monopoly are public utility companies like Dayton Power and Light.

3. Monopolist competition is characterized by many sellers, differentiated products, free entry and exit of firms. Monopolist competitive firms face a downward sloping demand curve which is elastic. It can sell more goods only by lowering the price. Profit maximization occurs at the intersection of MR and MC.