Microeconomics 2 Final Exam
DWL
1/2(Price of Monopoly - Price of Competitive Firm)(Quantity of competitive firm - Quantity of Monopoly) =
horizontal
A competitive firm has a (horizontal/negative) demand curve.
dumping
A form of price discrimination where a firm charges a higher price in its domestic market than it charges abroad.
decreasing-cost industry
A highly unusual (possibly non-existent) situation in which the long-run supply curve is downward sloping. (DON'T FORGET THE HYPHEN)
constant
A horizontal supply curve means that there is BLANK average cost.
decreases
A lower input price (decreases/increases) the MC.
innovation
A major factor of BLANK is that a firm that creates a new product knows it will (at least temporarily) receive a monopoly for it.
monopoly
A market with a single seller.
negative
A monopoly has a (horizontal/negative) demand curve)
unit elastic
A monopoly's D curve is (elastic/inelastic/unit elastic) where MR is zero.
elastic
A monopoly's demand curve is (elastic/inelastic/unit elastic) where MR is positive.
elastic
A profit-maximizing monopolist will always be selling at a price where demand is (elastic/inelastic/unit elastic).
second
A two-part tariff is a form of (first/second/third)-degree price discrimination.
demand
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market BLANK curve and the elasticity of the supply by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
supply
Among the factors that determine the extent of a firm's monopoly power are the elasticity of the market demand curve and the elasticity of the BLANK by other firms, and the number of rival firms. (WRITE ENTIRE WORD)
perfect
Another word for first-degree price discrimination is BLANK price discrimination
market segmentation
Another word for third-degree price discrimination
owners of inputs
As we move up a long-run cost curve, who benefits? (PLURAL, UNLESS THE ANSWER IS "NO ONE")
equilibrium
At long-run market BLANK, there is zero economic profit.
block
BLANK pricing creates a step-like price curve.
no
Does intertemporal price discrimination only apply when cost is constant?
zero
Economic profit is BLANK all along a competitive industry's long-run supply curve. (TYPE ENTIRE WORD OR PHRASE)
1/η
For a monopoly, (P-MC)/P =
P
For a monopoly, MC/[1-(1/η)] =
R
For a monopoly, P * Q =
D
For monopolies, the slope of the MR curve is, in absolute value, exactly twice the slope of the BLANK curve. (JUST TYPE LETTER)
monopoly
For the same demand and cost conditions, price will be higher and output lower under a (monopoly/free-market competition).
deadweight loss
Graphically, the area of the excess of value over cost associated with a monopoly increasing output is the societal BLANK due to the restriction of output.
no
If ATC < P, will a firm exit in the long run?
yes
If ATC > P, will a firm exit in the long run?
no
If AVC < P, will a firm shutdown in the short-run?
yes
If AVC > P, will a firm shutdown in the short-run?
decreases
If MC > MR, a firm's profit will increase if it (decreases/increases) output.
no
If a market demand curve is perfectly elastic, do any individual supplies have any monopoly power?
true
If a possible new entrant can come into the market at a specific price, the monopoly cannot ever charge more than this price (and be successful). True or false?
yes
If firm's cost curves differ, do they all still make long-run zero economic profit?
uniform
If firms produce a homogeneous product, then there will be a BLANK price.
opportunity costs
If one's firm production factors increase in value while another's don't, they still remain in long-run zero market equilibrium since the BLANK of the first firm goes up. (PLURAL)
monopoly
If price must be lowered to sell more output, the firm is a BLANK.
no
If the LAC curve lies entirely above the D curve, can a monopoly make a profit?
outwards
If the MC decreases, it shifts (inwards/outwards).
TR
In a monopoly, profit is maximized at the output where BLANK exceeds TC by the largest possible amount.
TC
In a monopoly, profit is maximized at the output where TR exceeds BLANK by the largest possible amount.
LS
In deriving the BLANK curve, one assumes that a short-run equilibrium was first established and then long run forces came into play. (JUST TYPE ABBREVIATION/SYMBOL)
dynamic
In general, monopolies appear to help society more when viewing through (dynamic/static) analysis.
higher
In general, prices are (lower/higher) where there are bans on advertising.
MR
In general, the rule for profit maximization is for MC =
marginal revenues
In market segmentation, the firm divides output between the market segments so that the BLANK are equal. (WRITE FULL PHRASE, PLURAL)
resale
In order to use price discrimination, BLANK must be impossible.
monopoly power
In order to use price discrimination, a firm must possess some degree of...
no
In reality, is an industry likely to fully attain a position of long-run equilibrium?
supply
In simple terms, a monopoly has no BLANK curve.
MR
In terms of per-unit curves, the output that miximizes profit in the short run is where MC =
AVC
In the short run, as long as AR = BLANK, then it is in the firm's interests to continue operation even if it is at a loss.
time
Intertemporal price discrimination creates multiple price curves for different BLANK frames
third
Intertemporal price discrimination is a type of (first/second/third)-decree price discrimination
no
Is the long-run supply curve derived by summing LMC curves of an industry's firms?
zero economic profit
LMC = LMR at... (DON'T WRITE "EQUILIBRIUM")
P
MC = MR =
TR
P * TQ =
largest
Profit is maximized at the output where total revenue exceeds total cost by the (smallest/largest) possible amount.
yes
Should a firm continue operating at zero economic profit?
ΣMR
Symbol for the sum of different market segment's marginal revenue
π
TR - C =
π
TR - TC =
technology
The LS curve assumes BLANK is constant.
(P-MC)/P
The Learner Index of Monopoly Power formula
no
The constant-cost industry refers to the fact that a firm's cost curves do not shift. Does that mean that every firm has a horizontal LAC curve?
AR
The demand curve is the same as the BLANK curve.
no
The demand curve's slope depends on the market setting, but does the output-decision rule for maximizing profit?
barriers of entry
The four types of BLANK are absolute cost advantage, economies of scale, product differentiation, and regulatory barriers. (PLURAL)
long-run industry supply curve
The long-run relationship between price and industry output, which depends on whether input prices are constant, decreasing, or increasing as the industry expands or contracts. (DON'T FORGET THE HYPHEN)
shutdown point
The minimum level of AVC is the...
true
The monopoly power possessed by one firm is limited the greater the number of rival firms. True or false?
price discrimination
The practice of charging different prices for the same product when there is no difference to the producer in supplying the product.
equalize
The tendency towards zero economic profit means that the rate of return on invested resources will tend to BLANK across industries.
inelastic
When a monopoly's demand curve is (elastic/inelastic/unit elastic where MR is negative.
MR
When the average revenue is constant (and its curve is thus flat and horizontal), AR =
price taker
a firm in a competitive market
price taker
a firm or consumer who cannot affect the prevailing price through production and consumption decisions.
static analysis
a form of economic analysis that looks at the efficiency of a market at any one point in time.
dynamic analysis
a form of economic analysis that looks, over time, at the efficiency of a market.
two-part tariff
a form of second-degree price discrimination in which a firm charges consumers a fixed fee per time period for the right to purchase a product at a uniform per-unit price.
intertemporal price discrimination
a form of third-degree price discrimination in which different market segments are willing to pay different prices, depending on the time at which they purchase a good
short-run firm supply curve
a graph of the systematic relationship between a product's price and a firm's most profitable output level.
product differentiation
a means by which consumers perceive the product sold by an incumbent firm to be superior to that offered by prospective rivals.
Learner index
a means of measuring a firm's monopoly power that takes the mark-up of price over marginal cost expressed as a percentage of a product's price.
price maker
a monopoly that supplies the total market and can choose any price along the market demand curve that it wants
P
a perfectly competitive firm maximizes price where MC = D =
D
a perfectly competitive firm maximizes price where MC = P =
first-degree price discrimination
a policy in which each unit of output is sold for the maximum price a consumer will pay. (DON'T WRITE PERFECT)
peak pricing
a pricing policy in which different prices are charged for peak and off-peak periods.
antitrust laws
a series of codes and amendments intended to promote a competitive market environment. (PLURAL)
economies of scale
a situation in which a firm can increase its output more than proportionally to its total input cost.
absolute cost advantage
a situation in which an incumbent firm's production cost (its LATC) is lower than potential rivals' production costs at all relevant output levels.
third-degree price discrimination
a situation in which each consumer faces a single price and can as much as desire at that price, but the price differs among categories of consumers. (DON'T WRITE MARKET SEGMENTATION)
budget lines
a two-part tariff creates multiple BLANK (PLURAL)
constant-cost industry
an industry in which expansion of output does not bid up input prices, the long-run average production cost per unit remains unchanged, and the long-run industry supply curve is horizontal. (DON'T FORGET THE HYPHEN)
increasing-cost industry
an industry in which expansion of output leads to higher production costs and the long-run supply curve slopes upwards. (DON'T FORGET THE HYPHEN)
natural monopoly
an industry in which production cost is minimized if one firm supplies the entire output. this occurs in economies of scale
block pricing
another word for second-degree price discrimination
barrier to entry
any factor that limits the number of firms operating in a market and thereby serves to promote monopoly power
resale
arbitrage of a product among market segments
regulatory barriers
barriers to entry created by the government through vehicles such as patents, copyrights, franchises, and licenses.
total revenue
price times the quantity sold (TYPE FULL PHRASE)
monopoly power
some ability to set price above the marginal cost
π/q
symbol for average profit per unit
AR
symbol for average revenue
DWL
symbol for deadweight loss
MR
symbol for marginal revenue
η
symbol for the elasticity of demand
π
symbol for total profit
TR
symbol for total revenue
profit maximization
the assumption that firms select an output level so as to maximize profit (yeah, it's an obvious question)
marginal revenue
the change in total revenue when there is a one-unit change in output (WRITE ENTIRE PHRASE)
total profit
the difference between total revenue and total cost (TYPE FULL PHRASE)
short-run industry supply curve
the horizontal sum of individual firms' marginal cost curves.
MC
the most profitable output occurs where ΣMR intersects BLANK.
survivor principle
the observation that in the competitive markets, firms that do not approximate profit-maximizing behavior fail, and the survivors are those firms that, intentionally or not, make the appropriate profit-maximizing decisions.
zero economic profit
the point at which total profit is zero since price equals the average cost of production
AR
the prevailing market price is the...
second-degree price discrimination
the use of a schedule of prices such that the price per unit declines with the quantity purchased by a particular consumer. (DON'T WRITE BLOCK PRICING)
average profit per unit
total profit divided by the number of units sold (WRITE ENTIRE PHRASE)
average revenue
total revenue divided by the output (WRITE ENTIRE PHRASE)