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 total profit of:

$150

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 total profit of:

$150

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

In economics, we refer to a situation in which there is only one firm but no real barriers to entry as a __________ market

Contestable

Which of the following is not a characteristic of monopoly?

Continuous economic profits

A natural monopoly is an industry in which _____ of scale are so extensive that the market is better served by a single firm.

Economies

For a monopoly, the _____ revenue curve is located below the _____ curve

marginal, demand

Monopolies charge prices _____ than those experienced by consumers in purely competitive markets.

Higher

The demand curve faced by a perfectly competitivd firm is perfectly _____

Horizontal

Total revenue minus the _____ costs and _____ costs of production is economic profit.

Implicit Economic

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

Loss

A(n) _____ produces less output than a competitive firm and therefore is likely to ire less labor.

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

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

True

Third-degree price discrimination charges different prices to different consumers in order to

increase profits.

The ability of a monopoly to influence prices by controlling the quantities that it produces in the market is called monopoly

power

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

may be subject to price regulation

A person who invents the ability to time travel will likely operate as a(n) _____ because there would be no substitutes and entering that market would be difficult for anyone else

monopoly

A pure ________ is the only seller in a market

monopoly

It is unlikely for a pure _____ to be productively efficient.

monopoly

The demand faced by a pure _____ is downward sloping.

monopoly

A(n) _____ monopoly is an industry in which economies of scale are so extensive that the market is better served by a single firm.

natural

Government regulation of _____ _____ can take several forms, such as imposing a normal profit price or a competitive price.

natural monopoly or monopolies

An industry in which economies of scale are so extensive that the market is better served by a single firm is known as a

natural monopoly.

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

The level of profit that occurs when total revenue is equal to total cost is known as _____ profit

normal

_____ profit is also known as zero economic profit.

normal

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

normal profit price

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

price discrimination

Total revenue equals

price times quantity

_____ equals the total revenue minus the total cost.

profit

The efficiency loss resulting from a monopolistic market is called a(n) _____ loss

deadweight

The regulated competitive price is _____ efficient

allocative

When output is produced so that the marginal benefit equals the marginal cost, there is _____ efficiency

allocative

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.

below, decreases

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the

deadweight loss

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

discrimination

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

regulate

The _____ price occurs when the price is equal to the marginal cost.

regulated

Total ________ equals price times quantity

revenue

A monopoly should produce output until the marginal ____ equals the marginal ____

revenue cost

Profit equals the total _________ minus the total ________

revenue - cost

When a firm has a loss, the total _____ is less than the total _____.

revenue - cost

all firms maximize profits by producing the quantity of output at which the marginal ___ is equal to the marginal ___

revenue - cost

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.

to demand

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.

lower, higher

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

economic

The regulated competitive price is allocatively _____

efficient

A business will charge a lower price to the group with the relatively more _____ demand and a higher price to the group with the relatively more _______ demand

elastic and inelastic

a business will charge a ___ price to the group with the relatively more elastic demand and a ___ price to the group with the relatively more inelastic demand

lower, higher

Price discrimination is only possible when a firm is a price _____

maker

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

marginal

For a monopoly, the ________ revenue curve is located below the _________ curve

marginal, demand

One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to:

market inefficiencies

Consumer surplus is the difference between the

maximum price consumers are willing and able to pay for a good or a service and the price they actually pay

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

benefit - cost

Which of the following suppliers is most likely to be a monopolist?

water company

As the market price decreases, all else held constant, a profit-maximizing firm will _____ its production

lower

A price-discriminating monopolist can increase profits by

charging a higher price to those with less elastic demand and a lower price to those with more elastic demand than it would if it could not price discriminate.

_____ markets maximize the availability of goods and services and the consumers ability to buy them.

competitive

Governments usually regulate monopolies because they want to achieve a(n) _____ outcome or _____ prices

competitive low, reduce, or lower

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

elastic, because this would increase total revenue

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

entry and exit

The marginal revenue is the

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

For the profit-maximizing level of output, the price charged by a monopoly is not just different but _____ than marginal revenue.

greater

Total revenue minus the _____ cost and _____ costs of production is economic profit.

implicit economic or explicit

Firms use price discrimination to:

increase their profits

Monopolies produce _____ output than competitive markets and are likely to hire _____ labor.

less and less

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

loss

_____ efficiency is producing output at the lowest possible average total cost of production.

productive

A pure monopoly has the overall market ______ to itself, because it is the only seller in a market

to demand