CH12 PURE MONOPOLY
Which of the following describes what "no close substitutes" means as it relates to consumers and a pure monopoly?
A consumer must either buy the monopolised product or do without it.
No close substitutes
A consumer must either buy the monopolized product or do without it entirely
A monopolist will not seek the highest price possible because?
A monopolist seeks maximum profit not maximum price
Which of the following is an example of a geographic monopoly?
A small town with one airport A small town with one restaurant A small town with one railroad
"Single Seller" refers to:
A sole producer of a specific good or service.
Which of the following are examples of a geographic monopolies? A. A small town with one railroad B. A small town with one restaurant C. A small town served by one airline D. A small town with more than one restaurant
A. A small town with one railroad B. A small town with one restaurant C. A small town served by one airline
Why do costs differ between a purely competitive firm and a pure monopoly? A. Allowing technological advances B. Access to different natural resources C. A factor called "X-inefficiency" D. Economies of scale E. Monopoly-preserving expenditures F. Different skill levels of labor
A. Allowing technological advances C. A factor called "X-inefficiency" D. Economies of scale E. Monopoly-preserving expenditures
Which of the following are reasons for a monopoly's loss of economic profit? A. Change in tastes reducing demand. B. Upward-shifting cost curves caused by escalating prices. C. Decreases in fixed costs D. Cost curves shifting downward due to rising prices.
A. Change in tastes reducing demand. B. Upward-shifting cost curves caused by escalating prices.
What is the difference in demand between a purely competitive seller and a monopolist? A. Demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not. B. Demand for the monopolist is perfectly elastic, and demand for the purely competitive seller is not.
A. Demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not.
What allows a natural monopoly to produce efficiency? A. Extensive economies of scale. B. Diseconomies of scale. C. A declining long-run average total cost curve. D. An increasing long-run average total cost curve.
A. Extensive economies of scale. C. A declining long-run average total cost curve.
An unregulated pure monopolist will maximize profits by producing that output at which Multiple Choice A. MR = MC. B. P = MC. C. P = ATC. D. MC = AC.
A. MR = MC. Correct
Which of the following is a good example of network effects? A. People with similar software can share pictures. B. Employees mingle in the break room at work. C. Microsoft delivers a program by disk to millions of consumers. D. The Internet allows people to send and receive emails.
A. People with similar software can share pictures. D. The Internet allows people to send and receive emails.
Imperfect competitors can influence product price by changing what? A. Quantity supplied B. labor inputs C. marketing D. research and development
A. Quantity supplied
In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to Multiple Choice A. marginal revenue. B. average cost. C. average variable cost. D. average total cost.
A. marginal revenue. Correct
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then the firm: A. may be broken into two or more competing firms. B. may be forced into filing for bankruptcy. C. may be required to testify before Congress. D. may be expressly prohibited from engaging in business activities.
A. may be broken into two or more competing firms. D. may be expressly prohibited from engaging in business activities.
If you want to enjoy a Major League Baseball game at the stadium in St Louis, you must patronize the Cardinals. This makes the Cardinals organization a Multiple Choice A. monopoly firm in St Louis. B. monopoly firm in Major League Baseball. C. purely competitive firm in St Louis. D. purely competitive firm in Major League Baseball.
A. monopoly firm in St Louis. Correct
Refer to the graph, which shows a total revenue curve for a monopolist. If total revenue falls as output expands, marginal revenue is Multiple Choice A. negative. B. zero. C. positive. D. greater than demand at that output level.
A. negative. Correct
Which of the following can cause x-inefficiency? A. poorly motivated work force B. highly effective supervision C. hiring the most qualified workers D. an interest in lowering costs E. desire for easier work life F. hiring incompetent relatives.
A. poorly motivated work force E. desire for easier work life F. hiring incompetent relatives.
Drawing a vertical line from the profit-maximising output on the horizontal axis to the demand curve represents the _______. A. price B. output C. total costs D. marginal revenue
A. price
At the profit-maximizing level of output for a monopolist, Multiple Choice A. price is greater than marginal cost. B. total revenue is greater than total cost. C. average total cost equals marginal cost. D. price is greater than average revenue.
A. price is greater than marginal cost. Correct
Monopolists may create an entry barrier when confronted with a new entrant to the industry by _______. (screenshot in ipad) A. B. C. D.
A. reducing product price B. D. incurring advertising costs
A pure monopoly exists when a single firm is the sole producer of a product for which there are no close _______. A. substitutes B. price takers C. complements D. complements E. patents
A. substitutes
What aspect of the market defines the crucial difference between a pure monopolist and a purely competitive seller? A. the demand curve B. the supply cure C. price D. output
A. the demand curve
Which of the following are reasons that a monopolist is considered a price maker? A. the monopolist exerts control over the price. B. the monopolist controls demand. C. the monopolist controls the total quantity supplied. D. the monopolist controls marketing.
A. the monopolist exerts control over the price. C. the monopolist controls the total quantity supplied.
How common are examples of less pure forms of monopoly? A. very common B. nonexistent C. rare D. not very common
A. very common
Why might a monopolist seek a less than maximum per unit profit?
Additional sales (quantity) more than compensate for the lower unit profit
Monopoly is a legitimate concern because monopolies can charge a higher than competitive prices that result in?
An under allocation of resources to the monopolized product
Refer to the diagrams. With the industry structures represented by diagram Multiple Choice A. (A), price exceeds marginal cost, resulting in allocative inefficiency. B. (A), there will be only a normal profit in the long run, while in (B) an economic profit can persist. C. (B), equilibrium price and quantity will be e and h, respectively. D. (B), price equals marginal cost, resulting in allocative efficiency.
B. (A), there will be only a normal profit in the long run, while in (B) an economic profit can persist. Correct
A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by Multiple Choice A. 4 units per day. B. 2 units per day. Correct C. 3 units per day. D. 1 unit per day.
B. 2 units per day. Correct
Which of the following describes why marginal revenue is less than price in an imperfect market? A. Because marginal revenue is greater than marginal cost which is less than price. B. Because the lower price of the extra unit of output only applies to all prior units of output. C. Because the lower price of the extra unit of output only applies to subsequent units of output. D. Because total revenue is greater than price.
B. Because the lower price of the extra unit of output only applies to all prior units of output.
Which of the following is characteristic of a pure monopolist's demand curve? Multiple Choice A. Its elasticity coefficient is 1 at all levels of output. B. It is the same as the market demand curve. C. Average revenue is less than price. D. Price and marginal revenue are equal at all levels of output.
B. It is the same as the market demand curve. Correct
Barriers to entry Multiple Choice A. are typically the result of wrongdoing on the part of a firm. B. can result from government regulation. C. usually result in pure competition. D. exist in economic theory but not in the real world.
B. can result from government regulation. Correct
Marginal revenue (MR) for the monopolist compared to that of a pure competitor: A. is constant and equal to product price. B. declines and is lower than product price. C. fluctuates and is higher than product price D. is constant and higher than product price
B. declines and is lower than product price.
What is the shape of the product demand curve for a pure monopolist? A. horizontal B. downward sloping C. upward sloping D. vertical
B. downward sloping
With a fixed downward sloping demand curve, the pure monopolist can only increase sales by charging a ______ price. A. fixed B. lower C. variable D. higher
B. lower
For a pure monopolist, the relationship between total revenue and marginal revenue is such that Multiple Choice A. total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing. B. marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing. C. marginal revenue is positive so long as total revenue is positive. D. marginal revenue is positive when total revenue is at a maximum.
B. marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing. Correct
It is difficult for a major league sports team to start up, because existing professional teams have contracts with the best players and long-term leases on stadiums. Which of the following does this illustrate? A. low barriers to entry B. obstacle to potential rivals C. ownership of a key resource D. a perfectly competitive market E. blocked entry
B. obstacle to potential rivals
One major barrier to entry under pure monopoly arises from Multiple Choice A. diseconomies of scale. B. ownership of essential resources. C. the availability of close substitutes for a product. D. the price taking ability of the firm.
B. ownership of essential resources. Correct
Refer to the diagrams. Firm A is a Multiple Choice A. pure monopoly, and Firm B is a pure competitor. B. pure competitor, and Firm B is a pure monopoly. C. pure monopoly, as is Firm B. D. pure competitor, as is Firm B.
B. pure competitor, and Firm B is a pure monopoly. Correct
Considering the industry structures of pure (perfect) competition and pure monopoly, a firm will experience a more inelastic demand curve in which form of industry? A. pure (perfect) competition B. pure monopoly
B. pure monopoly
What does the characteristic of monopoly called "blocked entry" refer to?
Barriers that keep potential competitors from entering the industry.
How is a pure monopoly able to maintain an economic profit in the long run?
Because there is now new entrants to increase supply, drive down price, and eliminate economic profit
How do you determine economic profit?
By multiplying per unit profit by the total quantity produced
How is economic profit determined?
By multiplying per unit profit by the total quantity produced
Which of the following are the main characteristics of a pure monopoly? A. Ease of entry for other firms. B. Availability of multiple substitutes of its products C. Blocked entry for other firms D. Absolute control over the price E. Presence of at least two sellers F. Presence of a single seller G. Unavailability of close substitutes of its products
C. Blocked entry for other firms D. Absolute control over the price F. Presence of a single seller G. Unavailability of close substitutes of its products
Refer to the diagram. At the profit-maximizing level of output, the firm will realise Multiple Choice A. an economic profit of ACGJ. B. a loss of JH per unit. C. an economic profit of ABHJ. D. a loss of GH per unit.
C. an economic profit of ABHJ. Correct
Economies of scale refer to __________ average total costs with added firm size. A. constant B. marginal C. declining D. rising
C. declining
Monopolists that have _______ products engage mainly in advertising their product's attributes. A. homogeneous B. standardised C. differentiated
C. differentiated
Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)? Multiple Choice A. if it discovered that it was producing where its MC curve intersects its demand curve. B. if it discovered that it was producing where MC = MR. C. if it discovered that it was producing where MC < MR. D. under none of these circumstances because a monopolist would never lower price.
C. if it discovered that it was producing where MC < MR Correct
When a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially levies a "private tax" on consumers. The owners of the monopoly benefit from these transactions at the expense of the consumer. This is an example of a monopoly contributing to: A. spillovers B. income equality C. income inequality D. externalities
C. income inequality
The profit-maximising monopolist avoids the inelastic segment of its demand curve because: A. it would mean lowering price and decreasing output, which leads to higher total revenue. B. it would mean raising price and increasing output, which leads to less total revenue. C. it would mean lowering price and increasing output, which leads to less total revenue. D. it would mean charging a regulated price and increasing output, which leads to less total revenue.
C. it would mean lowering price and increasing output, which leads to less total revenue.
There is some evidence to suggest that X-inefficiency is Multiple Choice A. more likely to occur in competitive firms than in monopolistic firms. B. absent whenever two or more producers are competing with one another. C. more likely to occur in monopolistic firms than in competitive firms. D. not encountered in either competitive or monopolistic firms.
C. more likely to occur in monopolistic firms than in competitive firms. Correct
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's Multiple Choice A. price, output, and average total cost would all be higher. B. price, output, and average total cost would all be lower. C. price and average total cost would be higher, but output would be lower. D. price and output would be lower, but average total cost would be higher.
C. price and average total cost would be higher, but output would be lower. Correct
The firm and _____ are synonymous in pure monopoly. A. supply B. productive efficiency C. the industry D. allocative efficiency
C. the industry
Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine: A. the loss-maximising output B. the profit-minimising output C. the profit-maximising output D. the loss-minimising output E. the minimum efficient scale
C. the profit-maximising output D. the loss-minimising output
What is a reason for a monopoly's loss of economic profit?
Changes in tastes that reduce demand for a product
Which of the following are forms of price discrimination?
Charging each customer the maximum price he or she is willing to pay Charging different customers different prices Charging each customer one price for the first unit and a lower price for subsequent units.
What might monopolists do when confronted with a new entrant into their industry?
Create an entry barrier
Total Output Price MR ATC MC 1 $100 $100 $100.00 $30 2 $90 $80 $63.00 $26 3 $80 $60 $52.67 $32 4 $70 $40 $49.50 $40 5 $60 $20 $49.60 $50 6 $50 $0 $50.00 $52 7 $40 -20 $52.29 $66 8 $30 -40 $55.75 $80 9 $20 -60 $60.67 $100 10 $10 -80 $67.60 $130 Refer to the data. At its profit-maximizing output, this firm's total revenue will be Multiple Choice A. $180. B. $198. C. $300. D. $280.
D. $280. Correct
Identify the correct statement: A. A monopolist is a price taker in an industry B. A monopolist cannot change its product price by changing the quantity supplied of the product. C. A monopolist produces an optimal combination of goods in the market. D. A monopolist can change its product price by changing the quantity supplied of the product.
D. A monopolist can change its product price by changing the quantity supplied of the product.
Refer to the graph, which shows a linear demand curve for a monopolist. Which of the following statements is correct? Multiple Choice A. The price elasticity of demand is greater at W than at V. B. The demand curve has unit price elasticity at W. C. The price elasticity of demand is less at U than at V. D. The area 0QVS is greater than the area 0RWT.
D. The area 0QVS is greater than the area 0RWT. Correct
Which of the following explains why a pure monopolist is able to maintain an economic profit in the long run? A. There are no new entrants to decrease supply, drive
D. There are no new entrants to increase supply, drive down price, and eliminate profit.
A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing Multiple Choice A. a loss that could be reduced by producing more output. B. an economic profit that could be increased by producing less output. C. a loss that could be reduced by producing less output. D. an economic profit that could be increased by producing more output.
D. an economic profit that could be increased by producing more output. Correct
Economic, technological, legal, pricing and advertising strategies are all types of ______. A. production strategies B. non-price competition C. economies of scale D. barriers to entry
D. barriers to entry
Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by Multiple Choice A. decreasing price and leaving output unchanged. B. increasing price and decreasing output. C. decreasing output and leaving prices unchanged. D. decreasing price and increasing output.
D. decreasing price and increasing output. Correct
Natural monopolies result from Multiple Choice A. pricing strategies. B. patents and copyrights. C. control over an essential natural resource. D. extensive economies of scale in production.
D. extensive economies of scale in production. Correct
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ________ so that other firms cannot compete. A. average variable costs B. barriers to entry C. marginal costs D. prices
D. prices
Refer to the long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is Multiple Choice A. producing the profit-maximizing output but is failing to minimise production costs. B. incurring X-inefficiency but is realizing all existing economies of scale. C. incurring X-inefficiency and is failing to realize all existing economies of scale. D. producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.
D. producing that output with the most efficient combination of inputs and is realizing all existing economies of scale. Correct
What leads to most patentable inventions and products? A. new technology B. marketing C. financial expertise D. research and development
D. research and development
Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called Multiple Choice A. rent-seeking. B. consumer sovereignty. C. economies of scale. D. simultaneous consumption.
D. simultaneous consumption. Correct
Patents provide the inventor with a monopoly position for what length of time? A. one year B. for the life of the inventor C. indefinitely D. twenty years
D. twenty years
Efficiency loss is also known as?
Deadweight loss
A pure monopolist must face a downward sloping product _____ curve?
Demand
What is the shape of the product demand curve for a pure monopolist?
Downward sloping
Price makers are firms with:
Downward sloping demand curves
Which of the following is more likely for a pure monopolist than for a pure competitor? A. economic loss B. lower costs C. accounting profit D. normal profit E. economic profit
E. economic profit
A pure monopolist Multiple Choice A. always realizes an economic profit. B. will realize an economic profit if ATC exceeds MR at C. the profit-maximizing/loss-minimizing level of output. D. will realize an economic loss if MC intersects the down-sloping portion of MR. E. will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.
E. will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. Correct
At the profit maximizing, loss minimizing output for a monopoly, of average revenue is less than average total costs, then the monopoly is experiencing?
Economic loss
What is more likely for a pure monopolist than for a pure competitor?
Economic profit
Which of the following is more likely for a pure monopolist that for a pure competitor?
Economic profit
Barriers to enter a pure monopoly
Economic, technological, legal, pricing and advertising strategies
What term is used to describe declining average total costs with added firm size?
Economies of scale
Which of the following steps are necessary to determine the profit-maximizing or loss minimizing level of output, profit-maximizing or loss minimizing price, and economic profit or loss in pure monopoly?
Employ the profit-maximizing or loss minimizing rule of MR=MC Identify the profit-maximizing or loss minimizing price and output by finding the price/output combination at MR=MC
pure monopoly
Exsists when a single firm is the sole producer of s product for which there are no close substitutes
True or False: Government licensing is not a barrier to entry.
False
What two terms are synonymous in pure monopoly?
Firm and Industry (A monopoly firm is the industry and the industry is the monopoly firm.
_________ create(s) legal barriers to entry.
Government
examples of monopolies
Government owned or government regulated public utilities, natural gas and electric companies, water company, cable tv company, local telephone company
Which of the following are characteristics of public utilities?
Government owned or regulated Monopolies or near-monopolies
When demand is elastics and marginal revenue is positive, total revenue must be?
Increasing
Why does the monopolist avoid the Inelastic segment of the demand curve?
It would mean lower if price and increasing output which leads to less total revenue
What are the two legal barriers to entry created by the government?
Licenses Patents
With a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a _____ price.
Lower
If producing is preferable to shutting down, a profit-seeking monopolist will produce up to the output at which:
MR=MC
A monopolist is a price____ because it controls the total quantity produced and thus has control over the price.
Maker
The change in total revenue is called ____ revenue.
Marginal
Which of the following are conditions necessary for price discrimination?
Market segregation Monopoly power No resale
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then the firm:
May be expressway prohibited from engaging in business activities, may be broken into two or more competing firms
Which of the following can be a cause of extensive economics of scale?
Modern technology
Entry is completely blocked to competitors in case of pure ________.
Monopoly
The main characteristics of a pure _____ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.
Monopoly
Single firm with the bulk of sales in a specific market
Near monopoly
Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely?
No close subsitutes
Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely?
No close substitutes
Which of the following is considered a barrier to entry protecting an inventor from its rivals?
Patents
What are the two legal barriers to entry created by the government? *all that apply*
Patents Licenses
Reasons monopoly is not widespread in the US?
Patents eventually expire, barriers to entry are seldom completely successful
The spread or difference that results when product price exceeds average total cost determines
Per unit economic profit
The spread or difference that results when product price exceeds average total cost determines:
Per unit economic profit
What can cause x-inefficiency?
Poorly motivated work force, desire for easier work life, hiring incompetent relatives
At a pure monopolist's profit-maximising output, its _________ exceeds marginal cost, resulting in allocative inefficiency.
Price
Which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing?
Price discrimination Public subsidies
A price _________ will use its power over product quantity and price whenever it is advantageous to do so.
Price maker
Entry is totally blocked to competitors in the case of what?
Pure monopoly
Which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes?
Pure monopoly
Imperfect competitors can influence product price by changing what?
Quantity supplied
Monopolists may create an entry barrier when confronted with a new entrant into the industry by:
Raising resource prices Reducing product price Incurring advertising costs
________ and development leads to most patentable inventions and products.
Resarch
________ and development leads to most patentable inventions and products.
Research
What leads to most patentable inventions and products?
Research and development
Natural gas and electricity are both examples of what type of monopoly?
Standardized
Which curve does a monopolist not have because there is no unique relationship between price and quantity supplied?
Supply curve
The firm and what are synonymous in pure monopoly?
The industry
The profit maximizing monopolist will always want to avoid which segment of its demand curve?
The inelastic segment
Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine:
The loss-minimizing output The profit-maximizing output
Which of the following are reasons that a monopolist is considered a price marker? *all that apply*
The monopolist exerts control over the price The monopolist controls the total quantity supplied
A monopolist does not have a supply curve because:
There is no single, unique price associated with each level of output It does not equate price with marginal cost
When faced with continuing losses, what do the owners of a monopoly do?
They move their resource to alternative industries in the long run
When faced with continuing losses , what do the owners of a monopoly do?
They move their resources to alternative industries in the long run.
A monopolist can change its products price by changing the quantity supplied of the product
True
A monopolist will never choose a price quantity combination that causes a decrease in total revenue
True
For the pure monopolist, there is no relationship between price and quantity supplied and therefore no supply curve
True
In the long run, a monopolist must obtain a minimum of a normal profit to prevent going out of business
True
In the long run, only normal profits for a pure competitor are possible, whereas a monopoly earns economic profit.
True
Monopolistic competition and obligopoly combine in differing degrees, characteristics of pure competition and pure monopoly
True
The economic profit per unit is the amount that the product price is greater than the average total cost at the profit maximizing output
True
The monopolist wants a price quantity combination to fall in the elastics section of its demand curve where a lower price means great total revenue
True
When productive efficiency and allocative efficiency are not achieved in a market it is known as efficiency loss
True
X-inefficiency occurs when a firm operates at a cost which is higher than the lowest cost for a particular level of output
True
rent-seeking expenditures add nothing to the firms output but increase the firms costs
True
Patents provide the inventor with a monopoly position for what length of time?
Twenty years
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
Up to the output at which marginal revenue equals marginal cost.
The exclusive right of an inventor to use, or to allow another to use, his or her invention it called:
a partent
Which of the following are examples of a geographic monopolies?
a small town with one restaurant a small town with one railroad a small town by one airline
single seller
a sole producer of a specific good or service
Which of the following are assumptions made in the model of pure monopoly?
a) Patents, economies of scale, and resource ownership secure the firm's monopoly c) The firm is a single-price monopolist; it changes the same price for all units of output e) No unit of government regulates the firm
Which of the following are reasons that a monopolist is considered a price maker?
a) The monopolist exerts control over the price. d) The monopolist controls the total quantity supplied.
Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine:
a) the loss-minimizing output d) the profit-maximizing output
The government broke up Standard Oil in 1911 due to its breach of _____ laws.
antitrust
With a fixed downward-sloping demand curve, how can a monopolist increase sales?
b) By charging a lower price
A monopolist does not have a supply curve because: A. B. C. D.
b) it does not equate price with marginal cost c) there is no single, unique price associated with each level of output.
Government licensing is a legal ____ to entry.
barrier
Government licensing is a legal ______ to entry.
barrier
As an example of ______, the Federal Commission licenses only so many radio and television station in each geographic area.
barriers to entry
Economic, technological, legal, pricing and advertising strategies are all types of ____.
barriers to entry
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
c) Up to the output at which marginal revenues equals marginal cost
The blocked entry characteristic of monopoly refers to barriers that keep potential _____ from entering the industry?
competitors
Efficiency loss occurs when the sum of ___and ___ is less than the maximum.
consumer surplus; producer surplus
Simultaneous _________ is a product's ability to satisfy a large number of consumers at the same time.
consumption
_____________ of essential property is a barrier to entry into an industry?
control
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total cost (ATC) are still _________.
declining
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs (ATC) are sill_____.
declining
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still ______________.
declining
Economies of scale refer to ____ average total costs with added firm size.
declining
When the demand for a good price is elastic, an increase in its price will __________ total revenue.
decrease
The key difference between a pure monopolist and a purely competitive seller lies on the ____ side of the market.
demand
Firms with downward-sloping product ___ curves are called price ____.
demand; makers
Firms with downward-sloping product _____ curves are called price ______.
demand; makers
Charging different prices to different buyers is known as price____.
discrimination
Total _____ profit is found by multiplying per-unit profit by the profit-maximising output.
economic
A firm's long-run average costs may decline over a wide range of output due to ________ of scale?
economies
A firm's long-run average total costs decline over a wide range of output due to __________ of scale
economies
A firm's long-run average total costs may decline over a wide range of output due to ____ of scale.
economies
A natural monopoly may occur when only a single firm can achieve the ____ of scale necessary to compete in an industry.
economies
Computer operating software, commercial aircraft, and basic steel are examples of industries in which ____ limit the entry of new firms.
economies of scale
The monopolist wants a price-quantity combination to fall in the ______ section of its demand curve, where a lower price means _______ total revenue.
elastic; greater
Barriers to __________ reduce the likelihood or prohibit firms from entering an industry?
entry
What two terms are synonymous in pure monopoly?
firm and industry. a monopoly firm is the industry and the industry is the monopoly firm.
The _______ regulates some natural monopolies to guard against excessively high prices to consumers.
government
All of the following are examples of barriers to entry, except: technology advertising patents income
income
All the following are examples of barriers to entry, except _________.
income.
For a pure monopolist, total revenue _______ at a diminishing rate.
increases
Monopolists may create an entry barrier when confronted with a new entrant into the industry by _________. *all that apply*
incurring advertising cost reducing product taking other strategic actions
In a pure monopoly, the demand curve for the firm is also the demand curve for the ___________.
industry
The profit-maximizing monopolist will always want to avoid the ____ segment of its demand curve.
inelastic.
The economic profit per unit is the amount that the product price ____ the average total cost at the profit-maximizing output.
is greater than
Government creates ____ barriers to entry.
legal
Government creates ________ barriers to entry.
legal
A price _____ will use its power over product quantity and price whenever it is advantageous to do so.
maker
The change in total revenue is called ________ revenue.
marginal
change in total revenue
marginal revenue
Which of the following are characteristics of public utilities? *all that apply*
monopolies or near monopolies Government owned or regulated.
A ____ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit.
monopoly
A(n) _________ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit.
monopoly
Barriers to entry contribute to _______ status.
monopoly
Entry is completely blocked to competitors in the case of pure_____.
monopoly
Network effects may drive a market toward ______ , because consumers tend to choose standard products that everyone else is using.
monopoly
The main characteristics of a pure _______ are presence of a single seller, availability of no close substitutes, price making power, blocked entry, and existence of non- price competition/
monopoly
A ____ -monopoly is a single firm that has the bulk of sales in a specific market.
near
What is the term used to describe a single firm with the bulk or sales in a specific market?
near monopoly
First Data Corporation accounts for 80% of the market for money order transfers. This is an example of a __________ -monopoly
near-monopoly
In the long run, only ______ for a pure competitor are possible , wherareas a monopoly earns _______.
normal profits; economic profits
Monopolistic competition and ____ combine, in differing degrees, characteristics of pure competition and pure monopoly.
oligopoly
The market structures of monopolistic competition and _________ combine, in differing degrees, characteristics of pure competition and pure monopoly.
oligopoly
A monopolist changes the _______ of its product by changing the quantity of the product it produces.
price
For the pure monopolist, there is no relationship between __________ and quantity supplied and therefore no supply curve.
price
Imperfect competitors, by changing market supply, can influence product _____.
price
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ____ so that other firms cannot compete.
prices
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ________ so that other firms cannot compete.
prices
In pure competition, _____ efficiency is achieved because free entry and exit forces firms to operate where average total cost is at minimum.
productive
Monopoly yields neither ___ efficiency nor allocative efficiency.
productive
When ____ efficiency and allocative efficiency are not achieved in a market, it is known as efficiency loss.
productive
For a monopolist, marginal ____ is lower than ____ (average revenue) for every unit of output except the first.
revenue; price
Which term describes a sole producer of a specific good or service?
single seller
Pure Monopoly Characteristics
single seller, no close substitutes, price maker, blocked entry
Monopolists that have _________ products engage mainly in public relations advertising, while those with _______ products advertised their products' attributes.
standardised; differentiated
The monopolist seeks maximum _______ profit, not maximum unit profit.
total
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the _____ _______ cost curve.
Average Total
Which of the following are reasons monopoly is not widespread in the United States? A. The government has successfully ended all monopolies. B. Barriers to entry are seldom completely successful. C. They are not profitable. D. Patents eventually expire.
B. Barriers to entry are seldom completely successful. D. Patents eventually expire.
Marginal revenue (MR) for the monopolist compared to that of a pure competitor: A. is constant and equal to product price. B. fluctuates and is higher than product price. C. is constant and higher than product price. D. declines and is lower than product price.
D. declines and is lower than product price.
With a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a _______ price. A. variable B. higher C. fixed D. lower
D. lower
What is the term used to describe a single firm with the bulk of sales in a specific market? A. regulated monopoly B. pure monopoly C. large corporation D, near-monopoly
D. near-monopoly
Natural gas and electricity are both examples of which type of monopoly? A. differentiated B. pure C. competitive D. standardised
D. standardised
Which of the following types of firms have achieved economies of scale through information technologies? A. Computer software B. Retail clothing C. Internet service D. Raw steel E. Wireless communication
Internet service Wireless communication Computer Software
______ effects exist if the value of a value of a product to each user increases as the total number of users increase.
Network
_______ competitors can influence total supply through their own output decisions.
imperfect
The profit-maximising monopolist will always want to avoid the ________ segment of its demand curve.
inelastic
The highest barriers to entry can be found with pure ______. The lowest barriers to entry can be found with pure ______.
monopoly; competition
When marginal revenue is ________ (positive/negative) total revenue is diminishing.
negative
A monopolist must obtain a minimum of a(n) ______ profit in the long run, or it will go out of business.
normal
A ______ is the exclusive right of an inventor to use, or allow another to use, her or his invention.
patent
The pharmaceutical industry is an example of an industry that has achieved a self-sustaining monopoly power through ____ on drugs.
patents
When marginal revenue is ______, total revenue is increasing.
positive
At a pure monopolist's profit-maximising output, its _____ exceeds marginal cost, resulting in allocative efficiency.
price
Which of the following are assumptions made in the model of pure monopoly? A. The firm is a single-price monopolist; it charges the same price for all units of output. B. No unit of government regulates the firm. C. The government regulates the firm. D. The firm is a multi-price monopolist; it charges different prices for all units of output. E. Patents, economies of scale, and resource ownership secure the firm's monopoly.
A. The firm is a single-price monopolist; it charges the same price for all units of output. B. No unit of government regulates the firm. E. Patents, economies of scale, and resource ownership secure the firm's monopoly.
Which of the following is a reason for a monopolist to block entry in a market? A. To restrict potential competitors from entering the market. B. To ensure availability of multiple substitutes of its products. C. To achieve efficiency in the production D. To attain socially optimum output.
A. To restrict potential competitors from entering the market.
What are the two legal barriers to entry created by the government? A. licenses B. Marginal cost C. Unions D. Patents
A. licenses D. Patents
Declines in the long-run average total costs occur due to which of the following: A. network effects B. simultaneous consumption C. spreading of product development costs D. learning by doing E. greater use of specialised inputs F. higher resource costs
A. network effects B. simultaneous consumption C. spreading of product development costs D. learning by doing E. greater use of specialised input
Imperfect competitors include which if the following? A. oligopolists B. monopolistic competitors C. pure monopolists D. pure competitors
A. oligopolists B. monopolistic competitors C. pure monopolists
The spread of difference that results when product price exceeds average total cost determines: A. per-unit economic profit B. total revenue C. per-unit total revenue D. per-unit normal profit
A. per-unit economic profit
Which of the following steps are necessary to determine the profit-maximising or loss-minimising level of output, profit-maximising or loss minimising price, and economic profit or loss in pure monopoly? A. Identify the profit-maximising or loss minimising price and output by finding the price/output combination at MR>MC. B. Employ the profit-maximising or loss minimising rule of MR=MC. C. Identify the profit-maximising or loss minimising price and output by finding the price/output combination at MR=MC. D. Employ the profit-maximising or loss minimising rule of MR>MC. E. Employ the profit-maximising or loss minimising rule of MC>MR.
B. Employ the profit-maximising or loss minimising rule of MR=MC. C. Identify the profit- maximising or loss minimising price and output by finding the price/output combination at MR=MC
If producing is preferable to shutting down, a profit-seeking monopolist will produce up to the output at which ______. A. MR > MC B. MR = MC C. P = ATC D. P = MC E. P = MR = MC
B. MR = MC
Which of the following can be a cause of extensive economies of scale? A. Labor B. Modern technology C. New production inputs D. Creative destruction
B. Modern technology
Which of the following entry barriers created by monopolists? A. Impositions of tariffs and quotas B. Price reductions C. Collaboration with government D. Increased advertising
B. Price reductions D. Increased advertising
What is the term for factors that prohibit firms from entering an industry? A. lack of entry B. barriers to entry C. reduction of entry D. barriers to business
B. barriers to entry
Consider the demand and marginal revenue information shown in the graph. A pure monopolist will come closest to maximising total revenue when it produces *approximately* at which of the following quantities? A. 10 B. 6 C. 8 D. 9
C. 8
_________ of essential property is a barrier to entry into an industry. A. Mergers B. Sale C. Control D. Deterioration
C. Control
Which of the following reasons explains why a professional sports team can be considered a monopoly? A. They draw a crowd according to preference that is usually dictated by geographic proximity. B. They are one of many suppliers of specific services in a large geographic area. C. They are the sole suppliers of specific services in a large geographic area.
C. They are the sole suppliers of specific services in a large geographic area.
Dentsply, a dominant American maker of false teeth, unlawfully prevented independent distributors of false teeth from carrying competing brands. This action is an example of ____________. A. small business thinking B. the power of private ownership C. a created entry barrier D. natural monopoly behavior
C. a created entry barrier
"Single seller" refers to: A. a group of producers selling a variety of goods and services. B. a price-taker producer of a specific good or service. C. a sole producer of a specific good or service. D. a sole proprietor.
C. a sole producer of a specific good or service.
At the profit-maximising (loss-minimising) output for a monopoly, if average revenue is less than average total costs, then the monopoly is experiencing: A. an economic profit B. a normal profit C. an economic loss
C. an economic loss
Efficiency loss is also known as _____ loss. A. wage B. utility C. deadweight
C. deadweight
When a firm produces a specific output level at a higher level at a higher cost than the necessary cost for that level of output, it is called: A. economies of scale B. rent-seeking expenditures C. x-inefficiency D. simultaneous consumption
C. x-inefficiency
A firm's manager is given the following information: To sell 4 units of output, a price of $132 must be charged; this level of output reflects marginal revenue of $102 and marginal costs of $60. If the firm wants to sell 5 units of output, a price of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $112 must be charged; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do? A. Produce 6 units of output and charge $112. B. Produce an amount less than 4 units. C. Produce an amount greater than 6 units. D. Produce 4 units of output and charge $132. E. Produce 5 units of output and charge $122.
E. Produce 5 units of output and charge $122
A firm positions itself in the best profit-maximising (or loss minimising) level of production if that amount of output reflects the point at which the last unit's marginal revenue is equal to its marginal cost because: A. each unit of output prior to the MR=MC rule earns more revenue for the firm than its costs. B. total revenue is greatest at amounts prior to the MR=MC amount. C. each unit of output after the MR=MC amount will earn less revenue that its costs. D. total revenue is greatest by producing after the quantity determined by the MR=MC rule.
Each unit of output prior to the MR=MC rule earns more revenue for the firm than its costs Each unit of output after the MR=MC amount will earn less revenue than its costs
Monopoly yields neither _______ efficiency nor allocative efficiency.
productive
When _______ efficiency and allocative efficiency are not achieved in a market, it is known as efficiency loss.
productive
_______ utilities are government owned or regulated.
public
_______ - _________ expenditures add nothing to the firm's output, but increases the firm's costs.
rent-seeking
For a monopolist, marginal ______________ is lower than _________ (average revenue) for every unit of output except the first.
revenue; price
Patents and patent laws aim to protect the inventor from _____.
rivals
Pure monopolists may have products that are ______ or differentiated.
standardised
A pure monopolist has no ___________ curve
supply
A monopolist will never choose a price-quantity combination that causes a decrease in _________ revenue.
total
