Monopoly Questions and Answers (Q&A)

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Start-up costs are too high

If Bob and Susie try to start up an airline, they will have to buy numerous costly inputs such as airplanes, staff and space in airports, etc. This will mean that they will have to charge incredibly high prices in comparison to Ryanair and Aerlingus, meaning...

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A.The entry of new firms is not a major concern.

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The monopolist s marginal revenue curve lies below its demand curve

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Diminishing marginal utility

Market failure occurs when resources are allocated inefficiently. Diminishing marginal utility is the law that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility...

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It leads to a better choice

Monopolistic competition is a market structure with a large number of firms, no barriers to entry, and product differentiation. If the nightclubs in Dublin had this type of market structure there would be many different clubs for students to choose from,...

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Never produce in the inelastic range of its demand curve

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Pareto Efficiency

If there is no way of improving the situation of one person, without making that of another person worse, the solution found is Pareto Efficient. Because Anne and Jim swapped and both of them benefitted from it without making the other worse off, Pareto Efficiency, or...

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Prohibiting attempted monopolies

The Sherman Act 1980 was the first US Federal statute to limit cartels and monopolies.

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