Econ, Pure Monopoly

Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:

$1.50.

Firms use price discrimination to:

increase their profits

The price that occurs where the demand and the marginal cost curves cross is called the:

regulated competitive price.

When a firm has a loss, the total ________ is less than the total ______

revenue, cost

Monopoly Power

the ability of a monopoly to influence prices by controlling the wquantities that it produces in the market

Marginal Revenue (MR)

the change in a firms total revenue that results from a one-unit change in output produced and sold

For a monopoly, the marginal revenues per unit fall ____ the price per unit because when the price ______, the monopoly gives up some revenue on units it could have sold at higher prices.

Blank 1: below or under Blank 2: drops, lowers, reduces, declines, decreases, or falls

Monopolies do not achieve allocative efficiency because they do not produce in such a way that their price or marginal ____ equals their marginal _____

Blank 1: benefit, benefits, or revenue Blank 2: revenues, cost, or costs

The regulated______price is allocatively efficient.

Blank 1: competitive

A perfectly competitive market is characterized by a large number of sellers producing a standardized product and taking the market price as given with easy ____ and ______ into the market.

Blank 1: entry, entering, or entrance Blank 2: exit, exiting, or exits

The level of profit that occurs when total revenue is ____ to total cost is known as normal profit.

Blank 1: equal, =, the same as, or identical

A business will charge a(n) ______price to the group with the relatively more elastic demand and a(n) _______ price to the group with the relatively more inelastic demand.

Blank 1: lower, low, smaller, lesser, or cheaper Blank 2: discounted, higher, larger, greater, or high

If the marginal revenue associated with selling one more unit of output is positive, the demand is:

If the marginal revenue associated with selling one more unit of output is positive, the demand is:

If you live in a town or a city that has a single provider of electricity or natural gas, then that natural monopoly provider:

If you live in a town or a city that has a single provider of electricity or natural gas, then that natural monopoly provider:

Profit Maximizing Rule

MR = MC

profit maximizing rule

MR = MC

Perfect price discrimination generates the best outcome for which of the following market structures?

Monopoly

Compared to an unregulated natural monopoly, what is true about the price charged and quantity produced when a natural monopoly is regulated?

Price is lower and Quantity is higher

Total Revenue (TR)

Price x Quantity

normal Profit

The level of profit that occurs when total revenue is equal to total cost. This level indicates that a firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or compete in a different industry. Normal profit is also known as zero economic profit.

price discrimination

The practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal.

The price that occurs where the demand and the average total cost curves cross is called the:

The price that occurs where the demand and the average total cost curves cross is called the:

The extra or additional revenue associated with the production of an additional unit of output is the _____ revenue

marginal

Barriers to Entry

any impediments that prevent firms from entering a market or industry

The allocatively efficient price can create a dilemma for regulators when:

the average total cost associated with the competitive quantity is higher than the price the natural monopoly is able to charge for it.

When a pure monopoly practices first-degree price discrimination,:

the demand curve becomes the marginal revenue curve.

economic profit

the level of profit that occurs when total revenue is greater than total cost

loss

the level of profit that occurs when total revenue is less that total cost

For a monopoly, the marginal revenue is below the demand curve because:

the monopoly has to lower the price on all units to sell more.

second degree price discrimination

the practice of charging different prices per unit for different quantities, or blocks, of a good or service. Also known as block pricing

third degree price discrimination

the practice of dividing market participants into groups based on their elasticities of demand in order to charge each group a different price for the same good or service

unregulated monopoly price

the profit-maximizing price that will result from an unregulated monopolistic market

Deadweight loss

the value of economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:

$2.50.

Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:

$250.

regulated competitive price

A regulated price that is equal to the marginal cost of production. The competitive price can be found where the marginal cost curve intersects the demand curve, and it is allocatively efficient.

Economies of Scale

a condition in which the long-run average total cost of production decreases as production increases

By charging consumers the highest price they are willing and able to pay, _____ extracts all surplus from consumers yielding higher profits than any other pricing method available to the firm.

a pure monopoly

regulated normal profit price

a regulated price that is equal to the average total cost of production. the normal profit price can be found where the average total cost curve intersects the demand curve

In a pure monopoly, the firm is willing to sell to anyone willing and able to pay at least the marginal cost of production. The result is that output is produced where D = MC, which is ____efficient

allocatively

natural monopoly

an industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product

If the government forces the monopoly to sell at a price equal to the marginal cost the natural monopoly would charge the regulated_____price

competitive

In economics, we refer to a situation in which there is only one firm but no real barriers to entry as a(n) ______ market.

contestable

A monopoly will charge consumers the price that they are willing and able to pay for the amount of output available which is shown along the _____ curve.

demand

The practice of selling the same good or service to different consumers at different prices is called price

discrimination

Total revenue minus the implicit costs and explicit costs of production is _____ profit

economic

The marginal revenue is the:

extra or additional revenue associated with the production of an additional unit of output.

Due to the market inefficiencies created by _______, one of the roles of government is to limit their market power or even to eliminate them entirely. (Use only one word to fill in the blank.)

monopolies

A profit-maximizing ______ will always operate on the elastic portion of a linear demand curve.

monopolist

A(n)___produces less output than a competitive firm and therefore is likely to hire less labor.

monopoly

A pure monopoly is a price maker engaging in ____ competition

nonprice

If the government forces the monopoly to sell at a price equal to the average total cost, the natural monopoly would make a(n) _____ profit.

normal

Because monopolies have market power and can influence the price of the goods they sell, they tend to ____ restrict and charge a higher _____ than would prevail in a competitive equilibrium.

output, price

If a monopoly wants to sell more units, it must lower the _______-for every unit it sells.

price

The practice of selling the same good or service to different consumers at different prices is called:

price discrimination.

productive efficiency

producing output at the lowest possible average total cost of production; using the fewest resources possible to produce\ a good or service

allocative efficiency

producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost

All firms maximize _____ by producing the quantity of output at which the marginal revenue is equal to the marginal cost.

profit

Monopoly

A market structure characterized by a single seller, producing a good or service for which there are no close substitutes, in a market with relatively blocked entry. A monopoly is a price maker

The practice of charging each and every consumer the price she is willing and able to pay for a good or service describes:

first-degree price discrimination. personal pricing. perfect price discrimination.

The level of profit that occurs when the total revenue is less than the total cost is called an economic

loss

When a regulated price results in a(n) _______, the government is likely to subsidize a natural monopoly.

loss

Price discrimination is only possible when a firm is a price

maker

_____equals the total revenue minus the total cost. (Use one word to fill in the blank.)

profit

Natural monopolies are rare and tend to be regulated by the government. (True or False)

true

There are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes.

true

Government regulation of natural monopolies can take several forms such as imposing a(n) ___profit price or a(n) _______ price. (Use one word per blank.)

Blank 1: normal Blank 2: competitive

Governments usually _______ monopolies because they want to achieve a competitive result or lower prices.

Blank 1: regulate or regulates