Monopoly

Extract E (line 10) states: ‘The minimum efficient scale in the water industry is large’. With the help of a diagram, explain why the large minimum efficient scale in the water industry is likely to lead to the market being supplied by a few large firms with monopoly power.

Extract B (lines 9–10) states: ‘After the monopoly’s patent expires, other companies can manufacture and market the same drug under its generic name, usually at a lower price.’

With the help of a diagram, explain why prices of pharmaceutical drugs supplied by a monopoly are likely to be higher than in markets which are more competitive.

Discuss whether governments should consider increasing the regulation and taxation of technology firms which have acquired significant global monopoly power.

Explain how the data in Extract A show that the market power of the Big Four banks is weakening against competition from smaller rivals.

Extract B (lines 4–6) states that ‘banks do not feel enough pressure to compete on price or quality, leading some to call for the Big Four to be split into a number of smaller banks.’

Use the extracts and your knowledge of economics to assess the view that the government should intervene further in the banking sector to promote greater competition.

Which one of the following provides a reason for government intervention in a market?

A firm benefits from significant and persistent economies of scale as it increases output. Which one of the following is the most likely consequence as it grows in size?

The firm’s

Extract B (lines 12–14) states that ‘The Universal Postal Service obligations require Royal Mail to deliver letters and parcels to all parts of the country six days a week’.

With the help of a monopoly diagram, explain how the Universal Postal Service obligations are likely to affect Royal Mail’s costs and profits.

Evaluate the view that government regulation of monopolistically competitive markets is unnecessary, and that polices to encourage competition and prevent the abuse of monopoly power should focus entirely on oligopolies and monopolies.