2.11 Market failure - market power (HL only) Questionbank

Explain why a loss-making company in perfect competition is likely to shut down in the long run.

Using real-world examples, evaluate the view that perfect competition is a more desirable market structure than monopolistic competition.

Explain how the principle of diminishing returns affects a company's short-term cost curves.

Using real-world examples, discuss the view that monopoly is an unfavorable market structure as it fails to achieve productive and allocative efficiency.

Explain the shape of the long-run average total cost curve.

Using real-world examples, evaluate fines as a measure against firms with large market power.

Explain how consumer nudges can reduce the consumption of demerit goods.

Using real-world examples, discuss the effectiveness of ad-valorem taxes in collecting government revenue.

Explain how a natural monopoly may arise.

Using real-world examples, evaluate the view that natural monopolies improve the efficiency in an economy.

Explain why a monopolistically competitive firm can make economic (abnormal) profit in the short term, but not in the long term.

Using real-world examples, evaluate government ownership as a measure to address market failure caused by the abuse of market power in a monopoly.

Using an appropriate diagram, explain the effects of direct government provision in a market.

Using real-world examples, evaluate the view that subsidies create more economic benefits than inefficiencies.