Econ chapter 12
Price exceeds marginal revenue for the pure monopolist because the
demand curve is downsloping
The pure monopolist's demand curve is
identical with the industry demand curve
The pure monopolist's demand curve is relatively elastic
in the price range where marginal revenue is positive
The demand curve faced by a pure monopolist
is less elastic than that faced by a single purely competitive firm
In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal
marginal revenue
In the short run a pure monopolist's profit
may be positive, zero, or negative
Large minimum efficient scale of plant combined with limited market demand may lead to
natural monopoly
Pure monopolists may obtain economic profits in the long run because
of barriers to entry
A pure monopolist is
a one-firm industry
Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is:
$3.40 or less. But how and why.........
Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the twenty-first unit of output is
$4.75 But how and why......
A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing
an economic profit that could be increased by producing more output.
The MR = MC rule
applies both to pure monopoly and pure competition
A pure monopolist should never produce in the
inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.
The nondiscriminating monopolist's demand curve
is less elastic than a purely competitive firm's demand curve
If a pure monopolist is producing at that output where P = ATC, then
its economic profits will be zero
If a pure monopolist is operating in a range of output where demand is elastic
marginal revenue will be positive but declining.
For a nondiscriminating imperfectly competitive firm
marginal revenue will become zero at that output where total revenue is at a maximum
Which of the following is a characteristic of pure monopoly
of barriers to entry
its economic profits will be zero
will realize an economic profit if price exceeds ATC at the equilibrium output