Microeconomics Chapter 8

The marginal revenue curve for a monopolist:

becomes negative when output increases beyond some particular level.

The supply curve of a pure monopolist:

does not exist because prices are not "given" to a monopolist.

The pure monopolist's demand curve is relatively elastic:

in the price range where marginal revenue is positive.

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 pure monopolist's demand curve:

is the industry demand curve.

If a pure monopolist is producing at that output where P = ATC, then:

its economic profits will be zero.

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand.

Pure monopolists may obtain economic profits in the long run because

of barriers to entry

A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5, then the

price of the seventh unit is $11.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

reducing output and raising price.

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:

underallocated because price exceeds marginal cost.

A pure monopolist:

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:

$.75 or less.

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

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.