A Basic Characteristic of Natural Monopoly Is

question 44

Multiple Choice

A basic characteristic of natural monopoly is

• A) that the firm has control over the entire supply of a basic input.
• B) that a firm is protected by a government franchise.
• C) patent protection of certain basic processes.
• D) continuously decreasing average costs as the firm expands output.
• E) collusion with other competitors in an attempt to divide up the market.

Understand the concept and calculation of the Herfindahl-Hirschman Index (HHI) for market concentration.

Recognize legal and illegal practices regarding price control in oligopolies.

Differentiate between various market structures, with a focus on oligopoly characteristics.

Identify factors leading to the success or failure of collusion in oligopolistic industries.

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Definitions:

Special-Interest Groups

Organizations that represent the interests of a specific group of people or industry, often lobbying government officials for policies beneficial to their members.

Rent-Seeking Behavior

Activities aimed at increasing one's share of existing wealth without creating new wealth, often through manipulation of the social or political environment.

Tax Breaks

Reductions in tax liability offered by the government to encourage or support certain activities or investments.

Median-Voter Model

A framework in political science that suggests outcomes of majority rule voting systems are determined by the preferences of the median voter.