ECO 365 WEEK 3 DQ 2 - 7078

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  • From: , Microeconomics
  • Posted on: Mon 09 Apr, 2012
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Request Description

Most people think monopolies are bad because they charge the highest price possible for their product. 

  1. Do you agree or disagree with this statement?  Please explain why. 
  2. What, if any, shortcomings arise from a monopoly pricing strategy (efficiency and welfare loss). 
  3. Are there any circumstances under which these shortcomings are mitigated?
  4. Can you give an example of a monopoly?
Solution Description

1. Yes I agree that monopolies are bad because they charge high prices. In a monopolistic market, there is just one supplier, or in other words, that supplier is the industry itself. Customers have no option but to go to that supplier. Customers will pay whatever the supplier demands since there is no one to compare the price