Monopoly Edexcel International GCSE Economics revision
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In plain words
A monopoly is the opposite of a competitive market: one firm supplies the whole market. With no rival to turn to, customers must pay what it asks or go without.
Monopolies last because something stops other firms from joining in.
5 things to know
- A monopoly is a market with a single seller, or one dominated by one firm. The firm is a price maker: it has power over the price, and its product has no close substitute.
- Barriers to entry keep rivals out: legal barriers such as patents and licences, very high start-up costs, large economies of scale, control of technology, and huge marketing budgets.
- Disadvantages: higher prices, restricted supply, less choice, and little pressure to improve quality or cut costs.
- Advantages: large economies of scale may lower costs, high profits can pay for research and new products, and in some industries, such as water pipes, one network avoids wasteful duplication.
- Effect on price: high. On quality: may be low. On choice: little. On profit: high.
Tips and tricks
- A monopoly cannot charge anything it likes. Raise the price and it sells less: it can choose the price or the quantity, but not both.
- To judge a monopoly, weigh the higher prices against what its profits and its scale can deliver.
It lands in your notebook with its questions as flashcards.
Monopoly: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Which is a feature of a monopoly?
With no competitors, the monopolist is a price maker.
Which is a legal barrier to entry?
A patent gives its holder the sole right to make the product for a period.
Compared with a competitive market, a monopoly is likely to have
There is no rival to hold the price down or to offer an alternative.
Which is a possible benefit of a monopoly?
Research is expensive, and large profits can fund it.
Why may a monopoly have lower average costs than small competing firms?
Its large scale of production lowers the cost of each unit.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Monopoly
Edexcel International GCSE Economics 4EC1 · 8 marks · papermunch.org
Name ______________________________ Date ______________
Define a monopoly.[2]
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A market with only one seller of a product, or a single firm that dominates the market.
Explain two barriers to entry that protect a monopoly.[3]
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A patent gives the firm the sole legal right to make the product, so others are not allowed to copy it. Very high start-up costs mean new firms cannot afford to enter the market.
Explain one possible advantage of a monopoly to consumers.[3]
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A monopoly makes high profits, which it can spend on research and development, so consumers may benefit from new and better products.
Answers: Monopoly
- 1. A market with only one seller of a product, or a single firm that dominates the market.
- 2. A patent gives the firm the sole legal right to make the product, so others are not allowed to copy it. Very high start-up costs mean new firms cannot afford to enter the market.
- 3. A monopoly makes high profits, which it can spend on research and development, so consumers may benefit from new and better products.