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Questions and Answers
What is a monopoly?
What is a monopoly?
- A situation where the government controls all industries
- A situation where consumers have equal power in an industry
- A situation where multiple companies compete in a particular industry
- A situation where a single company or group dominates a particular industry (correct)
What is the impact of a monopoly on consumers?
What is the impact of a monopoly on consumers?
- Unlimited choices and lower prices
- No impact on consumer choices or prices
- Increased competition and lower prices
- Limited choices and potentially higher prices (correct)
How does a monopoly affect competition?
How does a monopoly affect competition?
- It reduces competition by dominating the market (correct)
- It has no impact on competition
- It encourages fair competition among multiple companies
- It eliminates the need for competition
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Study Notes
Monopoly Definition
- A monopoly is a market structure in which a single company or entity supplies the entire market with a particular good or service.
Impact on Consumers
- Higher prices: Monopolies can charge higher prices to consumers due to the lack of competition.
- Reduced innovation: Without competitors, monopolies may not have an incentive to innovate or improve products.
- Limited choices: Consumers have limited or no alternatives, reducing their bargaining power.
Impact on Competition
- Barriers to entry: Monopolies can create barriers to entry for new firms, making it difficult for them to compete.
- Stifling innovation: Monopolies can reduce the incentive for innovation, leading to stagnant markets.
- Reduced economic efficiency: Monopolies can lead to inefficient allocation of resources, reducing overall economic efficiency.
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