Gantz

Price discrimination

Is an attempt by a monopoly to increase its profit by selling the same good to different customers at different prices

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

A monopoly has three main barriers to entry

monopoly resources: A key resource required for production is owned by a single firmGovernment regulation: The government gives a single firm the exclusive right to produce some good or service.The production process: A single firm can produce output at a lower cost than can a larger number of firms

In a perfectly competitive market,

no one seller can influence the price of the product

In a competitive market

no single buyer or seller can influence the price of the product

When a market is monopolistically competitive, the typical firm in the market is likely to experience

positive or negative profit in the short run and a zero profit in the long run

For a monopolistically competitive firm,

price is always higher than marginal cost

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which

profit is maximized

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

shift to the left

When a firm exits a monopolistically competitive market, the individual demand curves faced by all remaining firms in that market will

shift to the right

Price discrimination occurs in which market

A monopoly

When firms in an oligopoly are faced with making strategic choices in order to maximize profit, economists typically use

Game theory to model their behavior

The equilibrium quantity in markets characterized by oligopoly is

Lower than in monopoly markets and higher than in perfectly competitive markets

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Price discrimination

For a monopolistically competitive firm, at the profit-maximizing quantity of output

Price exceeds marginal cost

A key characteristic of a competitive market is that

Producers sell nearly identical products

What condition distinguishes monopolistic competition form perfect competition?

Product differentiation

Which of these situations products the largest profits for oligopolists

The firms reach the monopoly outcome

New firms will likely enter a monopolistically competitive market when price exceeds

average total cost

Profit-maximizing firms enter a competitive market when existing firms in that market have

average total costs less than market price

Which of the following is a characteristic of monopolistic competition? a) ownership of a key resource by a single firm b) free entry c) identical product d) patents

b) free entry

When firms are said to be price takers, it implies that if a firm raises its price,

buyers will go elsewhere

Which of the following is not a characteristic of monopolistic competition a) the number of sellers in the market b) the freedom of entry and exit by firms in the market c) the size of firms in the market d) product differentiation

d) product differentiation

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium.

each existing firm experiences a decrease in demand for its product.

For a firm in a perfectly competitive market, the price of the good is always

equal to marginal revenue

Competitive markets are characterized by

free entry and exit by firms

Because monopolistically competitive firms produce differentiated products, each firm

has some control over product price

In an oligopoly, the total output produced in the market is

higher than total output that would be produced if the market were a monopoly but lower than the total output that would be produced if the market were perfectly competitive

A firm operating in a monopolistically competitive market can earn economic profits in

in the short run but not in the long run

As the number of firms in an oligopoly market

increases, the market approaches the competitive market outcome

A monopoly is an inefficient way to produce a product because

it produces a smaller level of output than would be produced in a competitive market.

A monopolistically competitive industry is characterized by

many firms, differentiated products, and free entry

A monopolistically competitive firm chooses the quantity to produce where

marginal revenue equals marginal cost

In markets characterized by oligopoly

the oligopolists earn the highest profit when they cooperate and behave like a monopolist.

A monopolistically competitive firm chooses

the quantity of output to produce and the price at which it will sell its output.

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together,

they are unable to maintain the same degree of monopoly power enjoyed by a monopolist.