Monopoly

Question 1

Examples of barriers to entry

Answer 1

• Economies of scale
• Brand loyalty
• High sunk costs
• Pred/limit pricing
• Sunk costs
• Own resource
• Advertising
• Small number of firms- low competition
• Degree of product differentiation

Question 2

Benefits of price discrimination

Answer 2

• More profit- improved dynamic efficiency- better customer service
• Manage demand- encourage more off peak demand
• More elastic demand consumer get more welfare

Question 3

Price discrimination evaluation

Answer 3

• Firms may not reinvest profits
• Conditions for price discrimination may not have been met
• Less consumer welfare for inelastic market.