Changes

5) Cartel

5) Cartel

6) Monopoly (MC=MR is how the price is determined

6) Monopoly (MC=MR is how the price is determined)

'''3. Explain which specific type of industry (e.g., oligopoly or something else) each of these quotes probably refers to: (1) "She's the finest hair stylist in town; no one has her special style!", (2) "Crazy Eddie ... his low prices are INSANE!", (3) "Don't like his prices? He's the only one in town selling what you need." '''

'''3. Explain which specific type of industry (e.g., oligopoly or something else) each of these quotes probably refers to: (1) "She's the finest hair stylist in town; no one has her special style!", (2) "Crazy Eddie ... his low prices are INSANE!", (3) "Don't like his prices? He's the only one in town selling what you need." '''

3) Monopoly

3) Monopoly

'''4. List how monopolies can be established.''' Monopolies can be established several different ways.

'''4. List how monopolies can be established.''' Monopolies can be established several different ways.

1) The licensing of professionals creates a barrier to entry.

1) Government sometimes creates monopolies by operation of law

2) Control of a valuable resource can also create a monopoly.

2) The licensing of professionals creates a barrier to entry.

3) Economies of scale can create a monopoly by rewarding the biggest company with the lowest average cost.

3) Control of a valuable resource can also create a monopoly.

4) Government grants of monopoly such as patents and copyrights.

4) Economies of scale can create a monopoly by rewarding the biggest company with the lowest average cost.

'''5. What prevents a monopoly from increasing its prices without limitation?''' The Law of Demand: demand will decrease as the price increases simply because people will buy less as the price increases. People have limits on what they will spend.

'''5. What prevents a monopoly from increasing its prices without limitation?''' The Law of Demand: demand will decrease as the price increases simply because people will buy less as the price increases. People have limits on what they will spend.