# data[].attributes.body
(Argue Both Sides)
YES!
- Explain reason based on allocative Inefficiency --> P>MC where there is underproduction. NOTE: there is a larger DWL in monopoly compared to others e.g. Oligopoly, Monopolistic Competitive firms
- Exacerbates income inequality when supernormal profits are concentrated in the hands of the monopolist. Government thus intervenes by imposing profit taxes (MC/AC pricing) (Do Not Need To Explain)
- Market Dominance limits the choice of products and sellers especially in a monopoly. Thus, Govt. intervenes by lowering barriers of entry to allow new firms to enter the market to provide variety of product choices.

NO!
- If Government intervenes excessively by imposing heavy taxes, it reduces the incentive for monopolists to engage in R&D to improve their goods and services. This worsens dynamic efficiency of the monopolist and hence adversely affecting further consumers' choice.
- There may not be a need to intervene. If the monopoly is able to achieve substantial EOS with lower AC/MC below that of a perfect competitive firm, monopoly could produce higher output and a lower price than PC firm.
- Govt. may not need to intervene. Given the potential supernormal profits that can be earned, Intellectual property rights of a monopoly can encourage R&D for a monopolist. Hence, consumers may enjoy the choice of products.

# data[].attributes.headline
What are the forms of government intervention?

# data[].attributes.subject
What are the forms of government intervention?

# data[].attributes.body
-Use of laws to prevent/prohibit monopolisation in markets
(Legal restriction/Regulation)
-Deregulation to lower barriers of entry
-Price Regulations: MC/AC pricing
-Imposing taxes on monopolist
(e.g. lump sum tax, profit tax, variable tax

# data[].attributes.headline
Why is government intervention needed when a firm dominates the market?

# data[].attributes.subject
Why is government intervention needed when a firm dominates the market?

# data[].attributes.body
MUST draw Allocative Inefficiency diagram

# data[].attributes.attachment_link.title
Allocative Inefficiency in a market dominant firm

# data[].attributes.body
Identify 3Cs
1. Command: "Discuss Whether"
2. Concept: Government Intervention + Market Dominance + Market Failure
3. Context: General (No Specific Situation)

# data[].attributes.headline
'Market dominance is the main factor determining the profitability of firms.'

# data[].attributes.subject
'Market dominance is the main factor determining the profitability of firms.'

# data[].attributes.body
(a) Explain how market dominance can influence a firm's price and output decisions. [10]
(b) Discuss whether government intervention is always needed when a firm dominates the market. [15]

# data[].attributes.headline
Draw short-run equilibrium diagram of a price-setter firm earning SUPERNORMAL profit, I think.

# data[].attributes.subject
Draw short-run equilibrium diagram of a price-setter firm earning SUPERNORMAL profit, I think.

# data[].attributes.headline
How does market dominance affect price & output decisions?

# data[].attributes.subject
How does market dominance affect price & output decisions?

# data[].attributes.body
In market dominance, I will consider the perspective of a monopolist for my analysis. In the short run, the profit maximising monopolist also produces an output level where MR=MC where MC is rising. In the short run, it can earn supernormal, subnormal or normal profits. The monopoly will consider shutting down only when average revenue is unable to cover its AVC.

In the long run, the monopolist would charge a price and produce an output that can retain its supernormal profit. And if demand cannot cover its average cost, it will shut-down and exit the industry permanently. When a firm exits, it basically winds up all its operations. The capital resources thus get free for use in another venture.

# data[].attributes.body
How are price and output determined?
In this case of a monopolist or oligopolist's perspective, the firms finds the profit maximising output by producing the quantity where marginal revenue equals marginal cost, then projects that quantity on to the market demand curve to determine what market price corresponds to that quantity when a monopoly or oligopolist has a sufficiently large market share to set price.

# data[].attributes.body
Identify 3Cs
1. Command: "Explain how"
2. Concept: Market Dominance + Impact on Firm's price + Output Decisions
3. Context: General (No specific situation)

# data[].attributes.body
What is market dominance?
Market Dominance refers to markets in which the product sold is supplied by a single or a few large sellers. These sellers have substantial market share or control over supply and the market price.

# data[].attributes.headline
'Market dominance is the main factor determining the profitability of firms.'

# data[].attributes.subject
'Market dominance is the main factor determining the profitability of firms.'

# data[].attributes.body
(a) Explain how market dominance can influence a firm's price and output decisions. [10]
(b) Discuss whether government intervention is always needed when a firm dominates the market. [15]