What is meant by market power? What are the ways in which a monopoly gains market power?
What will be an ideal response?
Market power relates to the ability of sellers to affect prices. For the monopolist, market power arises because of barriers to entry. Barriers to entry are obstacles that prevent potential competitors from entering the market. There are two types of market power that arise from barriers to entry: legal market power and natural market power. Legal market power occurs when a firm obtains market power through barriers to entry created not by the firm itself, but by the government. For example, firms gain market power through patents and copyrights. Natural market power arises when the monopolist owns or controls a key resource necessary for production or there are economies of scale in production over the relevant range of output.
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The aggregate supply curve slopes ________ because a ________ in the price level brings a ________ in the real wage rate
A) upward; rise; rise B) downward; fall; rise C) upward; rise; fall D) upward; fall; fall E) downward; rise; rise
Many clothing manufacturers are able to practice price discrimination by selling products in department stores and also in outlet stores
Indicate whether the statement is true or false
The _____________ received funding from the federal government and two states
a. Chesapeake and Ohio Canal b. Erie Canal c. Pennsylvania Mainline Canal d. Cumberland and Oxford Canal
A monopoly firm operates with declining marginal cost. If regulators impose marginal cost pricing, the market will
a. remain a monopoly but behave like a perfectly competitive industry. b. become perfectly competitive. c. be entered by additional firms but will not necessarily become perfectly competitive. d. be exited by the existing firm if the regulators will let the firm leave the market.