Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can describe a monopoly and explain why it lasts only while barriers to entry keep rivals out. (Guide: “What a monopoly is”)
- I can define a natural monopoly and tell it apart from a patent, licence or resource monopoly. (Guide: “Natural monopoly”; Practice Q2)
- I can compare a monopoly with a perfectly competitive industry by price, quantity, consumer surplus, deadweight loss and long-run profit. (Guide: “Monopoly compared with perfect competition”; Practice Q3)
Calculation and graphing
- I can find the profit-maximising quantity from a table or from equations using MR = MC, and read the price from demand. (Guide: Worked examples 1 and 2; Practice Q1, Q4, Q6)
- I can calculate profit or loss as (P − ATC) × Q, and explain why fixed cost changes profit but not the quantity or price. (Practice Q1, Q4)
- I can calculate consumer surplus, producer surplus and deadweight loss for a monopoly, and check them against total surplus under competition. (Guide: Worked example 2; Practice Q6)
- I can draw a correctly labelled monopoly graph and shade profit, consumer surplus and deadweight loss. (Guide: Figure 1; Practice Q5)
- I can draw a natural monopoly graph with ATC falling across all of demand and MC below ATC. (Guide: Figure 2)
- I can use total cost figures to show that one firm supplies a market more cheaply than several. (Guide: Worked example 3; Practice Q7)
Reasoning
- I can explain why the monopoly’s price is above MC and why that makes its output inefficient. (Guide: “How a monopoly chooses its output”; Practice Q3)
- I can explain why a profit-maximising monopoly does not produce the revenue-maximising quantity and always produces where demand is elastic. (Guide: Worked example 1(c); Practice Q4, Q6)
- I can explain why a natural monopoly would make a loss if it had to charge P = MC. (Guide: Worked example 3(c))
All ticked? Move on to Topic 4.3, Price Discrimination, or return to the course roadmap.