Econ ch 6 and 7
Natural Monopoly
Achieving economies of scale over time.
For a monopolist, marginal revenue is:
Always less than price, after the first unit.
A contestable market is:
An imperfectly competitive situation that is subject to entry.
An oligopoly
An industry in which a few large firms supply most or all of a product.
natural monopoly.
An industry in which one firm can achieve economies of scale over the entire range of output is referred to as:
A duopoly.
An industry in which only two firms compete to supply a particular product.
The equilibrium price for a perfectly competitive firm always occurs:
At the intersection of market supply and market demand.
A monopolist sets its price:
At the rate of output where marginal revenue equals marginal cost.
Obstacles that make it difficult or impossible for additional producers to begin producing or selling in a new market are referred to as:
Barriers to entry.
A natural monopoly is a firm that:
Can produce the entire market supply more efficiently than any number of smaller firms.
A perfectly competitive firm:
Can sell all of its output at the prevailing price.
In the perfectly competitive catfish market, the market demand curve is:
Downward sloping.
Which of the following does not characterize a competitive market?
High barriers to entry
Contestable market
Imperfectly competitive industry subject to entry if prices or profits increase.
A patent:
Is a government grant of exclusive ownership of an innovation.
f the entire output of a market is produced by a single seller, the firm:
Is a monopoly.
Market power:
Is the ability to alter the market price of a good or service.
The demand curve for an individual monopolist:
Is the same as the market demand curve.
A producer tries to maximize profits by operating at an output where:
MC equals price.
Monopolists are price:
Makers, but perfectly competitive firms are price takers.
an example of monopolistic competition?
Many firms supply similar products, each with some consumers who show significant brand loyalty
The change in total revenue that results from a one-unit increase in quantity sold is:
Marginal revenue.
Which of the following do a monopolist and a competitive firm have in common?
Profit-maximization rule.
When a new firm enters a market, it:
Reduces the profits of existing firms.
Economies of Scale
Reductions in minimum costs that come through increases in the size of plant and equipment
Marginal Revenue (MR)
The change in total revenue from one unit increase in production
Market power exists if a firm can alter:
The market price.
Which of the following is an argument in support of monopolies?
They are protected from competition so they have greater ability to pursue research and development.
Monopoly
a firm that produces the entire market supply of a particular good or service
Competitive Firm
a firm without market power, with no ability to alter the market price of the goods it produces
Competitive Market
a market where no buyer or seller have market power
Economies of scale
an increase in the size of a factory results in reductions in minimum average costs, this is known as:
Not a characteristic of a perfectly competitive market
brand loyalty
When firms exit an industry, price _______ and industry output _______.
increases, decreases
Competitive Profit Maximization Rule
produce at that rate of output where price equals marginal cost
If marginal cost equals price, then _____ is at a maximum.
profit
Predatory pricing
selling a product below cost to drive competitors out of the market
Supply
the ability and willingness to sell goods at specific prices in a given time.
Market Power
the ability to alter the market price of a good or service
Market structure is determined by:
the number and relative size of firms in an industry
Marginal Cost Pricing
the offer (supply) of goods at prices equal to their marginal cost
production decision
the selection of the short-run rate of output
The price of a good multiplied by the quantity sold equals:
total revenue
In a perfectly competitive market:
No seller has market power.
