ECon 222 Learnsmart Chapter 12

For a monopolist, marginal ____ is lower than ____ (or average revenue) for every unit of output except the first.

-Revenue -Price

Firms with downward-sloping product ____________ curves are called price ____________.

-demand -makers

A monopoly price will lead to _____; a fair return price will lead to _____; and a socially optimal price will lead to _____.

-economic profit -normal profit -economic loss

Monopolists that have _____ products engage mainly in public relations advertising, while those with _______ products advertise their products' attributes

-standardized -differentiated

Which of the following can increase profits by charging different prices to different buyers?

A monopoly

The exclusive right of an inventor to use, or to allow another to use, her or his invention is called:

A patent

What does the characteristic of monopoly called "blocked entry" refer to?

Barriers that keep potential competitors from entering the industry

How does a monopolist change the price of its product?

By changing the quantity of the product it produces.

What is the shape of the product demand curve for a pure monopolist?

Downward sloping

What term is used to describe declining average total costs with added firm size?

Economies of scale

True or false: For a pure monopolist, total revenue increases at an increasing rate.

False

True or false: Price discrimination is not practiced very often in the US economy.

False

All of the following are examples of barriers to entry, except ____.

Income

When marginal revenue is negative, what is happening to total revenue?

It is diminishing

What happens to total revenue when marginal revenue is positive?

It is increasing

How do economies of scale affect long-run average total costs for a firm?

Long-run average total costs decline over a wide range of output.

The change in total revenue is called _____ revenue.

Marginal

Which of the following combine, in differing degrees, characteristics of pure competition and pure monopoly?

Monopolistic competition and oligopoly

Entry is completely blocked to competitors in the case of a pure ______

Monopoly

The main characteristics of a pure ______ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.

Monopoly

____ is/are worth studying because it provides insights into the market structures of monopolistic competition and oligopoly

Monopoly

What is the term used to describe a single firm with the bulk of sales in a specific market?

Near-monopoly

Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely?

No close substitutes

Which of the following is considered a barrier to entry into an industry?

Ownership of essential property

______ laws aim to protect an inventor from rivals who would use the invention shared in the effort and expense of developing it.

Patent

Market segregation is vital for a monopolist to

Price discriminate

What is the term used to refer to charging different prices to different buyers of a specific product?

Price discrimination

A firm's manager is given the following information: To sell 4 units of output, a price of $132 must be charge; this level of output reflects marginal revenue of $102 and marginal costs of $60. If the firm wants to sell 5 units of output, a price or $122 must be charge; this reflects marginal revenue of $82 and marginal cost of $70. To sell 6 units of output, a price of $112 must be charge; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do?

Produce 5 units of output and charge $122

____________ utilities are government owned or regulated.

Public

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

______ and development leads to most patentable inventions and products.

Research

Patents and patent laws aim to protect the inventor from ___.

Rivals

Which term describes a sole producer of a specific good or service?

Single seller

Natural gas and electricity are both examples of which type of monopoly?

Standardized

Pure monopolies may have products that are ______ or differentiated.

Standardized

A pure monopolist has no _____ curve.

Supply

Which curve does a monopolist not have because there is no unique relationship between price and quantity supplied?

Supply curve

What aspect of the market defines the crucial difference between a pure monopolist and a purely competitive seller?

The demand curve

In a pure monopoly, marginal revenue is less than price for every unit of output except which one?

The first

Which of the following reasons explains why a professional sports team can be considered a monopoly?

They are the sole suppliers of specific services in a large geographic area.

How can imperfect competitors influence total supply?

They can make their own output decisions

The profit-maximizing level of output can be determined by comparing:

Total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference.

How common are examples of less pure forms of monopoly?

Very common

Which of the following are assumptions made in the model of pure monopoly? a. No unit of government regulates the firm. b. The firm is a multi-price monopolist; it charges different prices for all units of output. c. Patents, economies of scale, and resource ownership secure the firm's monopoly. e. The firm is a single-price monopolist; it charges the same price for all units of output f. The government regulates the firm

a. No unit of government regulates the firm c. Patents, economies of scale, and resource ownership secure the firm's monopoly d. The firm is a single-price monopolist; it charges the same price of all units of output.

Which of the following competitors are imperfect? a. Oligopolists b. Pure monopolists c. Monopolistic competitors e. Pure competitors

a. Oligopolists b. Pure monopolists c. Monopolistic competitors

What are the two legal barriers to entry created by the government? a. Patents b. Unions c. Licenses d. Marginal cost

a. Patents c. Licenses

Which of the following is a reason for a monopolist to use price discrimination? a. To increase its profit b. To minimize dead weight loss c. To block entry of other firms d. To ease entry of other firms

a. To increase its profits

A monopoly is likely to suffer losses when: a. price is a set to marginal cost b. price is set to achieve productive efficiency c. it produces where marginal revenue equals marginal cost d. price is set to achieve the most efficient allocation of resources

a. price is set to marginal cost d. price is set to achieve the most efficient allocation of resources

Which of the following are examples of geographic monopolies? a. A small town with more than one restaurant b. A small town served by one airline c. A small town with one railroad d. A small town with one restaurant

b. A small town served by one airline c. A small town with one railroad d. A small town with one restaurant

Which of the following are conditions necessary for price discrimination? a. Homogenous market b. No resale c. Market segregation d. Advertising e. Monopoly power

b. No resale c. Market segregation e. Monopoly power

A monopolist does not have a supply curve because: a. It does not produce at the minimum average total cost. b. It does not equate price with marginal cost c. It does not equate marginal revenue with marginal cost d. There is no single, unique price associated with each level of output.

b. it does not equate price with marginal cost d. there is no single, unique price associated with each level of output.

Economic, technological, legal, pricing, and advertising strategies are all types of ____.

barriers to entry

Which of the following are legal barriers to entry? a. Diseconomies of scale b. Imposing tariff c. Government licensing d. Introducing patents

c. Government licensing d. Introducing patents

Which of the following are examples that may be found of x-inefficiency in regulated firms? a. Acquiring necessary equipment b. The need for low cost wage earners c. Nicer-than-competitive wages d. Higher-than-competitive wages e. More managers and staff than necessary

c. Nicer-than-competitive wages d. Higher-than-competitive wages e. More managers and staff than necessary

Which of the following are reasons that a monopolist is considered a price maker? a. The monopolist controls marketing. b. The monopolist controls demand. c. The monopolist exerts control over the price. d. The monopolist controls the total quantity supplied.

c. The monopolist exerts control over the price. d. The monopolist controls the total quantity supplied

What might monopolists do when confronted with a new entrant into their industry?

create an entry barrier

Which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing? a. Tariffs b. Quotas c. Charging a price equal to MC d. Price discrimination e. Public subsidies

d. Price discrimination e. Public subsidies

Marginal revenue (MR) for the monopolist compared to that of a pure competitor.

declines and is lower than product price

The natural monopoly occurs when the market demand curve crosses the long -run average total cost curve where average total costs (ATC) are still _____.

declining

When the demand for a good is price elastic, an increase in its price will ______ (increase/decrease) total revenue.

decrease

Monopolists that have ____ products engage mainly in advertising their products' attributes.

differentiated

Price ______ is/are illegal in the United States only if it is part of a firm's strategy to lessen or eliminate competition.

discrimination

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

The demand curve of the purely competitive seller is horizontal or perfectly ______, whereas the demand curve of the monopolist is not.

elastic

Barriers to ______ (entry/exit) reduce the likelihood or prohibit firms from entering an industry.

entry

_____ create(s) legal barriers to entry.

government

One reason that fair return pricing is so complex is because regulatory commissions must set prices sufficiently ____ costs to create fair returns; therefore, regulated monopolists have little incentive to minimize average total costs.

greater than

X-inefficiency occurs when a firm operates at a cost, which is ______ (higher/lower) than the lowest cost for a particular level of output.

higher

_____ competitors include pure monopolists, oligopolists, and monopolistic competitors.

imperfect

The profit-maximizing monopolist will always want to avoid the ____ segment of its demand curve.

inelastic

When comparing the demand curve for a perfectly competitive firm to the demand curve of a monopolist, the monopolist's demand curve would be more ____.

inelastic

The economic profit per unit is the amount that the product price ____ the average total cost at the profit-maximizing output.

is greater than

With a fixed downward-sloping demand curve, the pure monopolist can only increase sales by charging a _____ price.

lower

Monopolists use economies of scale to block the entry of new firms into an industry by:

lowering prices so that another firm cannot compete

Slashing prices is an example of an entry barrier created by a(n) ______.

monopoly

Because Intel provides 80% of the central microprocessors used in personal computers, it is a:

near-monopoly

A monopolist will use its power over _____ whenever it is advantageous to the monopoly to do so.

product output and price

A pure monopoly exists when a single firm is the sole producer of a product for which there are no close ____.

substitutes

The firm and ____ are synonymous in pure monopoly.

the industry

A monopolist will never choose a price-quantity combination that causes a decrease in _____ revenue.

total

The rend of federal, state, and local governments abandoning price regulation if the possibility of competition looks promising is due to ___.

x-inefficiency