Chapter 10 - Pure Monopoly

*The higher prices charged by monopolists are like a ___ ___ that redistributes income from consumers to ____ _____.

are like a private tax that redistributes income from consumers to monopoly sellers.

Monopolists can create barriers to entry by 3 ways:

decreasing price, increasing advertising, and increasing resource prices.

*The supply curve of a pure monopolist ___ ___ ___ because prices are not ____ to a monopolist.

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

A lone barbershop in a small community is what type of monopoly

geographic monolopy

*A nondiscriminating profit-maximizing monopolist will never produce in the output range where demand is _____.

in the output range where demand is inelastic.

*Assuming no change in product demand, a pure monopolist must do what to increase sales

lower prices

*To maximize profit a pure monopolist must _____ the difference between ____ _____ and _____ _____.

maximize the difference between total revenue and total cost.

*A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price may be ___ or ____ than ATC.

may be greater or less than ATC

*There is some evidence to suggest that X-inefficiency is:

more likely to occur in monopolistic firms than in competitive firms.

*Large minimum efficient scale of plant combined with limited market demand may lead to:

natural monopoly

When product price exceeds ATC you get a ____ ____ ____ ____.

per-unit economic profit

How is economic profit determined (math)?

per-unit profit multiplied by the profit maximizing output

A pure monopolist has no relation between ____ and quantity supplied.

price

*Suppose for a regulated monopoly that price equals minimum ATC but price exceeds MC. This means that ____ _____ is being achieved, but not _____ ______.

productive efficiency is being achieved, but not allocative efficiency

*X-inefficiency least likely to be present in ____ _____.

pure competition

A pure monopolist has no ____ cruve

supply curve

*If a pure monopolist can price discriminate by separating buyers into two or more groups the firm will face ____ ____ ___ ____. (4 words)

the firm will face multiple marginal revenue curves.

*Price discrimination refers to

the selling of a given product at different prices that do not reflect cost differences.

Regulatory agencies set a ____ ____ price (a term) that a utility company can earn

Fair return price

*The non-discriminating monopolist's demand curve is more or less elastic than a purely competitive firms? (more / less)

Less

A monopoly will produce output to the point where ___ equals ____.

MR = MC

In the short run a pure monopolist will charge the highest price the market will bear for its product (True/False)

True

*Confronted with the same unit cost data, a monopolistic producer will charge _____ _____ and produce a ____ ____ than a competitive firm.

a higher price and produce a smaller output than a competitive firm.

*Pure monopoly refers to:

a single firm producing a product for which there are no close substitutes.

____ _____ is the apportionment of resources to obtain production of products most wanted by society

allocative effeciency

DeBeers Consolidated Mines markets about what percent of the worlds rough-cut diamonds?

55 percent

A monopolist can increase profit by charging ___ ____ to ___ ____.

Charging different prices to different buyers.

*If profits are maximized (or losses minimized), what is common to both unregulated monopoly and to pure competition?

MR= MC

_____ and _____ are examples of legal barriers that create monopolies.

Patents and Licenses

Five characteristics of a pure monopoly

Price-maker, blocked entry, single-seller, no close substitutes, and non price competition.

Natural Gas and Electricity are examples of what type of monopoly

Standardized Monopoly

**The profit-maximizing output of a pure monopoly is not socially optimal because in equilibrium ____ exceeds ____ ____.

price exceeds marginal cost

*With respect to the pure monopolist's demand curve it can be said that ___ ___ marginal revenue at all outputs greater than ____.

price exceeds marginal revenue at all outputs greater than 1.

Monopolists do not have a supply curve because it does not equate ____ with _____ _____ and there is no single ____ price associated with each level of _____.

price with marginal cost and there is no single unique price associated with each level of output

*If the variable costs of a profit-maximizing pure monopolist decline, the firm should:

produce more output and charge a lower price.

**The vertical distance between the horizontal axis and any point on a nondiscriminating monopolist's demand curve measures ___ ____ and ___ ____.

product price and average revenue

*____ ____ behavior is not a possible source of natural monopoly?

rent-seeking behavior

The ___ _____ price is where a monopoly's price = MC

socially optimal

A monopolist uses the profit maximizing rule of MC = MB to determine ____ and _____.

supply and price

*For a pure monopolist marginal revenue is less than price because when a monopolist ___ ____ to sell more output, the ___ ___ applies to all units sold.

when a monopolist lowers price to sell more output, the lower price applies to all units sold.