6 What is meant by the term ‘pure monopoly’? (3 marks)7 What is meant by the term ‘monopoly power’? (3 marks)8 Explain how ‘natural monopoly’ can occur. (5 marks)9 Explain how concentration ratios provide an indication of the level ofmonopoly power in an industry. (5 marks)10 Explain how internal economies of scale can act as a barrier to entry intoa market. (6 marks)

A 'pure monopoly' refers to a market structure where a single company is the sole producer and seller of a product or service in the entire market. This company has 100% market share, meaning there are no direct competitors. This situation often arises when the company owns a key resource, has a patent or copyright, or there are high barriers to entry for other firms. (3 marks)

'Monopoly power' refers to the degree of control a business has over the market price and output of a product or service. A company with monopoly power can manipulate prices, create barriers to entry for potential competitors, and influence other market factors. This power is often a result of the company being the only provider of a good or service, or having a dominant market share. (3 marks)

A 'natural monopoly' can occur when a market's infrastructure only allows for one firm to operate efficiently. This is often the case in industries with high fixed costs, such as utilities. For example, it would be inefficient to have multiple companies each with their own set of power lines or water pipes. Therefore, it's more efficient for one company to serve the entire market. (5 marks)

Concentration ratios measure the combined market share of the top firms in an industry. A high concentration ratio indicates a high level of monopoly power, as it shows that a small number of firms dominate the market. For example, if the top four firms in an industry have a combined market share of 80%, this suggests a high level of monopoly power. (5 marks)

Internal economies of scale refer to cost advantages that a firm can achieve by increasing its scale of production. These can act as a barrier to entry into a market because new, smaller firms cannot match the low costs of the larger, established firms. For example, a large firm may be able to buy raw materials in bulk at a discount, or spread its fixed costs over a larger output. This can deter new firms from entering the market, as they would struggle to compete on price. (6 marks)