Pure Monopoly
first-degree price discrimination is the practice of charging the maximum possible price for each unit which enables the firm to capture maximum ____ for itself
consumer surplus
marginal revenue
`extra or additional revenue associated with the production of an additional unit of output
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 barriers to entry
monopoly is a market structure characterized by
a market with barriers to entry a good or service for which there are no close substitutes a single seller the firm having significant price control
regulated normal profit price
a regulated price that is equal to the average total cost of production
regulated competitive price
a regulated price that is equal to the marginal cost of production can be found where the marginal cost curve intersects the demand curve, and it is allocatively efficient.
characteristics of contestable firm
a single firm no real barriers to entry
economies of scale
a situation in which the average total cost of production decreases as output increases
the competitive price can be found where the marginal cost curve intersects the demand curve, and it's
allocative efficiency
normal profit is
also known as zero economic profit
natural monopoly
an industry in which economies of scale are so extensive that the market is better served by a single firm
barriers to entry
any impediments that prevent firms from entering a market or industry
the difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not equilibrium is
deadweight loss
normal price can be found where the average total cost curve intersects the
demand curve
consumer surplus
difference between the maximum price consumers are willing and able to pay for a good or a service and the price they actually pay
perfect price discrimination
different names for first-degree price discrimination
a business will charge a lower price to the group with the relatively more (elastic/inelastic) demand a higher price to the group with the relatively more (elastic/inelastic) demand
elastic inelastic
what usually regulates monopolies because they want to achieve a competitive outcome, or lower prices
governments
for the profit-maximizing level of output, the price changed by a monopoly is not just different but (greater than/less than) marginal revenue
greater than
by charging consumers the (lowest/highest) price they are willing and able to pay, the pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method available to the firm
highest
characteristics of a perfectly competitive market
large number of sellers no control over price
when a firm has a loss, the total revenue is (greater than/less than) the total cost
less than
When a pure monopoly practices first-degree price discrimination, the demand cruve becomes the
marginal revenue curve
a person who invents the ability to time-travel will likely operate as a ______ , since there would be no substitutes and entering that market would be difficult for anyone else
monopoly
for a ______ , the marginal revenue curve is located below the demand curve
monopoly
the economies of scale in ____ are so extensive that the market is better served by a single firm
natural monopolies
the practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes (3)
personal pricing first-degree price discrimination perfect price discrimination
the pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs which of the following
personal pricing first-degree price discrimination perfect price discrimination
the pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs
personal pricing first-degree price discrimination perfect price discrimination
if a firm wants to sell more units, it must lower the ___ for every unit it sells
price
to calculate the profit, which three pieces of information need to be identified
price average total cost quantity of output
a monopoly is a
price maker
price discrimination is only possible when a firm is a _____
price maker
total revenue equals
price per unit times quantity sold
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
second-degree price discrimination is most commonly done by a
pure monopoly
the practice of changing different prices per unit for different quantities, or blocks, of a good or service is called
second-degree price discrimination block pricing
monopoly power
the ability of a monopoly to influence prices by controlling the quantities that it produces in the market
total revenue minus
the implicit costs and explicit costs of production is economic profit
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.
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 than total cost
when regulators require a monopoly to charge the normal profit price
the monopoly has little incentive to reduce its costs of production the monopoly has zero economic profit
first-degree price discrimination
the practice of charging every consumer the price that she is willing and able to pay for something
profit discrimination
the practice of selling the same good or service to different consumers at different prices
unregulated monopoly price
the profit-maximizing price that will result from an unregulated monopolistic market
economic profit equals
total revenue minus the implicit costs and explicit costs of production
price equals
total revenue minus the total cost
profit equals
total revenue minus the total cost
(t/f) natural monopolies are rare and tend to be regulated by the government
true
(t/f) there are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes
true
profit maximization
implies that monopoly firms should expand production up to the point where the marginal revenue equals the marginal cost
if the marginal revenue associated with selling one more unit of output is positive, the demand is elastic, because this would (decrease/increase) total revenue
increase
deadweight loss
value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium
second-degree price discrimination (block pricing)
when a firm is charging different prices per unit for different quantities, or blocks, of a good or service
price discrimination
best described as the practice of selling the same good or service to different consumers at different prices
perfectly competitive market
characterized by a large number of sellers producing a standardized product and taking the market price as given, with easy entry and exit into the market