Pure Monopoly
Which of the following are forms of price discrimination?
-Charging different customers different prices -Charging each customer one price for the first unit and a lower price for subsequent units -Charging each customer the maximum price he or she is willing to pay
What allows a natural monopoly to produce efficiently?
-Extensive economies of scale -A declining long-run average total cost curve
Which of the following are conditions necessary for price discrimination?
-Market segregation -No resale -Monopoly power
Which of the following are assumptions made in the model of pure monopoly?
-The firm is single-price monopolist; it charges the same price for all units of output -No unit of government regulates the firm -Patents, economies of scale, and resource ownership secure the firm's monopoly
A monopolist does not have a supply curve because:
-There is no single, unique price associated with each level of output -it does not equate price with marginal cost
Which of the following are reasons for a monopoly's loss of economic profit?
-Upward-shifting cost curves caused by escalating resource prices -Change in tastes reducing demand
A firm positions itself in the best profit-maximizing (or loss-minimizing) level of production if that amount of output reflects the point at which the last unit's marginal revenue is equal to its marginal cost because
-each unit of output after the MR=MC amount will earn less revenue that it costs -each unit of output prior to the MR=MC rule earns more revenue for the firm than its costs
Which of the following steps are necessary to determine the profit-maximizing or loss minimizing level of output, profit-maximizing or loss minimizing price, and economic profit or loss in pure monopoly?
-employ the profit-maximizing or loss minimizing rule of MR=MC -identify the profit-maximizing or loss minimizing price and output by finding the price/output combination at MR=MC
Monopolists may create an entry barrier when confronted with a new entrant into the industry by:
-incurring advertising costs -reducing product price -raising resource prices
A monopolist does not have a supply curve because:
-it does not equate price with marginal cost -there is no single, unique price associated with each level of output
Imperfect competitors include which of the following?
-monopolists -pure monopolists -monopolistic competitors
Imperfect competitors include which of the following?
-pure monopolists -monopolistic competitors -oligopolists
What aspect of the market defines the CRUCIAL difference between a pure monopolist and a purely competitive seller?
-the demand curve
Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine:
-the loss-minimizing output -the profit-maximizing output
All else equal, which is more likely to experience an economic profit in the long-run?
A pure monopolist
Which of the following is a reason for a monopoly's loss of economic profit?
Changes in tastes that reduce demand for a product
Which of the following is more likely for pure monopolists than a pure competitor?
Economic profit
What term is used to describe declining average total costs with added firm size?
Economies of scale
When marginal revenue is negative, what is happening to total revenue
It is diminishing
Considering the industry structures of pure (perfect) competition and pure monopoly, a firm will experience a more inelastic demand curve in which form of industry?
Pure monopoly
Imperfect competitors can influence product price by changing what?
Quantity supplied
The profit-maximizing monopolist will always want to avoid which segment of its demand curve?
The inelastic segment
How can imperfect competitors influence total supply?
They can make their own output decisions
Monopoly yields neither productive nor _____ efficiency
allocative
When marginal revenue is zero, total revenue is:
at its maximum
In a non-competitive market, price is equal to:
average revenue
A monopolist can increase its profit by
charging different prices to different buyers
Marginal revenue for the monopolist compared to that of a pure competitor
declines and is lower than product price
A natural monopoly occurs when the market demand curve crosses the long-run average total cost curve where average total costs (ATC) are still ______
declining
Economies of scale refer to ______ average total costs with added firm size
declining
When the price elasticity of demand is elastic, an increase in price will _______ total revenue
decrease
Price makers are firms with:
downward-sloping demand curves
Total _______ profit is found by multiplying per-unit profit by the profit-maximizing output
economic
Modern technology can be a cause of extensive _____
economies of scale
What is another name for deadweight loss
efficiency loss
The demand curve of the purely competitive seller is horizontal or perfectly _____ whereas the demand curve of the monopolist is not
elastic
For a pure monopolist, total revenue _____ at a diminishing rate
increases
The change in total revenue is called _______ revenue
marginal
A ______ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit
monopoly
When the market demand curve crosses the long-run average total cost curve where average total costs are declining, it is called a:
natural monopoly
A monopolist must obtain a minimum of a ______ profit in the long run, or it will go out of business.
normal
Which of the following is a barrier to entry into an industry?
ownership of essential property
The difference that results when product price exceeds average total cost determines:
per-unit economic profit
When marginal revenue is _____, total revenue is increasing
positive
For the pure monopolist, there is no relationship between _____ and quantity supplied and therefore no supply curve.
price
___ is equal to average revenue in non-competitive market
price
_____ is equal to average revenue in a NON-competitive market
price
Economic profit for a monopolist can be calculated by multiplying the difference between ______ and _______ total cost by quantity.
price, average
For a monopolist, marginal _______ is lower than ______ because the lower price of an extra unit of output also applies to all prior units of output
revenue, price
A pure monopolist has no _______ curve
supply
Network effects exist if the value of a product to each user increases as the total number of _____ increase
users