(a) Explain what is meant by monopoly and, using a diagram, explain why a monopoly may have lower average costs of production than a firm in perfect competition. [10]

·        Definition and examples of different types of monopoly.I.e. pure, natural, and local monopolies.High barriers to entry&exit / price-makers.·        Definition of perfect competition.Many buyers and sellers / homogenous goods / low barriers to entry&exit / price-takers.·        Average cost of a monopoly diagram:Draw and explain diagram.·        Average cost of a perfectly competitive firm diagram:Draw and explain diagram.·        Why monopoly has lower AC than perfectly competitive firm:High barriers to entry protect abnormal profits.Monopsony power.Economies of Scale.