Questions and Answers
What characterizes a single seller in a monopoly?
What does it mean when a good has no substitutes in a monopoly?
It is a unique good with no alternatives.
How does a firm in a monopoly manipulate the price?
By changing the quantity it produces.
High barriers to entry in a monopoly prevent new firms from entering the market.
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What is meant by 'some nonprice competition' in a monopoly?
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Study Notes
Monopoly Characteristics
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Single Seller
- A monopoly features a single firm that dominates the entire market, controlling supply and demand.
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No Substitutes
- Monopolies provide a unique good or service that has no close substitutes, making consumers reliant on the monopolist for that product.
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Price Maker
- The monopolistic firm possesses the ability to set prices in the market by adjusting production levels, influenced by the demand for its product.
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High Barriers to Entry
- Significant obstacles hinder new firms from entering the market, resulting in a lack of immediate competitors and allowing the monopolist to maintain long-term profits.
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Some "Nonprice" Competition
- Despite having no close competition, monopolies engage in advertising and promotional activities to boost demand for their products, differentiating themselves in non-price ways.
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Description
Explore the key characteristics of monopolies with these flashcards. Each card presents a critical term related to monopoly markets along with its definition. Test your understanding of how single sellers and market dynamics operate in a monopoly structure.
