Question

Monopolies are firms who dominate the market. A monopoly tends to set higher prices than a competitive market, leading to a lower consumer surplus. However, on the other hand, monopolies can benefit from economies of scale, leading to lower average costs, which can, in theory, be passed on to consumers. Distinguish between monopoly, pure monopoly, and bilateral monopoly by providing specific support for your claim.

Answer 1

Monopoly is a market structure with a single seller and no competition. Pure monopoly is a more specific type with no close substitutes. Bilateral monopoly involves a single seller and a single buyer with negotiation power.

Step-by-step explanation:

Monopoly, pure monopoly, and bilateral monopoly are different types of market structures with varying characteristics.

Monopoly:

A monopoly is a market structure where there is only one seller and no competition. The monopolist has complete control over the price and quantity of the product. The monopolist can charge any price it wishes, but it must consider the demand curve to maximize its profit.

Pure Monopoly:

A pure monopoly exists when there is only one seller in the market with no close substitutes for its product. The monopolist has a significant market share and faces no competition. The pure monopolist has the power to set the price and quantity, but it must consider the demand curve to maximize profit.

Bilateral Monopoly:

A bilateral monopoly is a market structure where there is a single seller and a single buyer. Both parties have some degree of market power and can negotiate the terms of the transaction. The outcome of a bilateral monopoly depends on the bargaining power of each party.