Microeconomics Ch14
If a natural monopolist were required to charge a price equal to marginal cost it would make a _____.
loss
If price is less than average total cost at the profit-maximizing level of output, a monopolist will make
loss
A natural monopolist would make a loss if it charged a price equal to _____.
marginal cost
A market structure in which there are many firms selling differentiated products and few barriers to entry is called ___________________ competition.
monopolistic
A market structure in which there are many firms selling differentiated products and few barriers to entry is called _____.
monopolistic competition
With a network externality, a product becomes more beneficial when
more people use it.
A single firm can produce at a lower cost than can two or more firms in a ____________ monopoly.
natural
A single firm can produce at a lower cost than can two or more firms in the case of a(n) _____.
natural monopoly
If a monopolist takes over what had been a competitive market
price will rise. output will fall.
If price exceeds average total cost at the profit-maximizing level of output, a monopolist will make
profit
A platform business is a business that
provides a place for people to interact.
A monopolistic competitor
takes into account the effect that increasing output has on marginal revenue.
Output would be lower and price would be higher if a competitive market is made into a monopoly because a monopolist
takes into account the effect that restricting output has on price
The marginal revenue curve for a monopolist is
the additional revenue the firm will get by expanding output.
True or false: A key difference between monopolists and perfect competitors is that a perfectly competitive firm's marginal revenue is the given market price, whereas a monopolist's marginal revenue is not its price.
true
True or false: A monopolistic competitor takes into account the effect that increasing output has on marginal revenue.
true
Refer to the graph above for a monopolistic competitor with demand curve D, marginal revenue curve MR, and marginal cost curve MC. What level of output will the firm produce?
4 units
If a monopolistic competitor is incurring a loss, which of the following adjustments may occur in the long run?
-The average total cost curve shifts downwards as the firm contracts marketing expenditures. -Existing firms exit the market.
If a monopolistic competitor is making a profit, which of the following adjustments may occur in the long run?
-The average total cost curve will shift upwards as the firm expands marketing expenditures to protect its market share. -New firms enter the market
The key differences between a monopolist and a perfect competitor is that:
-a monopolist takes into account the fact that its output decision can affect price. A perfect competitor does not. -a monopolist is protected by barriers to entry. A perfect competitor is not. -as the number of units a monopolist sells increases, the price it can get for those units falls. A perfect competitor cannot affect market price.
Characteristics of monopolistic competition include:
-differentiated products. -many sellers.
Characteristics of monopolistic competition include:
-easy entry of new firms in the long run. -multiple dimensions of competition.
When MC = MR, the monopolist is maximizing profit because
-if MR < MC, the monopolist gains profit by decreasing output. -if MR > MC, the monopolist gains profit by increasing output.
A price-discriminating monopolist would charge consumers with
-more elastic demands a lower price. -less elastic demands a higher price.
Platform businesses earn income from:
-selling ad space. -selling data on its users.
Refer to the graph shown for a monopolist. What is the welfare loss from the monopoly?
B and D
Refer to the graph shown for a monopolistic firm with demand curve D, marginal revenue curve MR and marginal cost curve MC. What price will the monopolist charge for its products?
$15
The profit maximization rule for a monopolist is _____.
MC=MR
Refer to the graph shown. The correct marginal revenue curve for the given demand curve D is _____.
MR2
Which of the following types of firms can earn a profit in the long run?
Monopolist
Refer to the graph shown for a monopolist firm facing demand curve D, marginal revenue curve MR, marginal cost curve MC and average total cost curve ATC. Which region represents the profit that the monopolist makes?
None of the regions shown
Which of the following firms in long-run equilibrium, produces at the point where average total costs are minimum?
Perfect competitor
In the long run
a monopolist can earn a profit while a monopolistic competitor cannot.
Which of the following are not barriers to entry in a monopoly?
Diseconomies of scale Differentiated products
Which of the following firms is most likely to exhibit network externalities?
Refer to the graph shown for a monopolist firm facing demand curve D, marginal revenue curve MR, marginal cost curve MC and average total cost curve ATC. Which region represents the profit that the monopolist makes?
Regions I and II
Which of the following is most likely to exhibit network externalities?
Social networks
Refer to the graph shown, which compares the long-run equilibrium for a perfect competitor on the left to a monopolistic competitor on the right. What mistakes are there in the graphs?
The ATC curve for the monopolistic competitor is tangent to its marginal revenue curve.
The marginal revenue curve of a monopolistic competitor is
below the demand curve.
In the long run, profit is zero for
both perfectly and monopolistically competitive firms
A monopolist
can earn a profit, zero profit, or even incur a loss.
When MC > MR, the monopolist will
decrease output.
As output increases, marginal revenue of a monopolist
decreases
A monopolist producing at the profit-maximizing level of output represented in the graph shown is earning
economic profit.
To raise profits a price-discriminating monopolist would charge different prices to different consumers based on their
elasticities of demand.
A monopolist's marginal revenue is always less than the price it receives because the price it receives for its product
falls for all units as it increases output.
True or false: A monopolist's marginal revenue is always above its price because to sell more it must lower its price.
false
True or false: A platform businesses do not earn income since their services are free.
false
True or false: Compared to a perfectly competitive market, in a monopoly, output is higher and price is lower because a monopoly takes into account the effect that restricting output has on marginal product.
false
True or false: For a monopolistic competitor, the marginal revenue curve is above the demand curve.
false
True or false: In the long run, a monopolistic competitor incurs a loss.
false
True or false: Refer to the graph shown. MR correctly represents the marginal revenue curve for the given demand curve, D.
false
True or false: The marginal revenue curve for a monopolist reflects the increase in the price the firm will get by expanding output.
false
One objective a firm that would like to benefit from a first-mover advantage is to
gain as many customers as possible quickly.
When MC = MR, the monopolist
has no incentive to change its output.
When MC < MR, the monopolist will
increase output
As output decreases, marginal revenue of a monopolist
increases
When MC < MR, the monopolist will increase output because
increasing output increases total profit.
A price discriminating monopolist charges different prices for different _____.
individuals
Which of the following are barriers to entry in a monopoly?
-Economies of scale -Government restrictions -Natural ability
The difference between the average total cost curve in a perfectly competitive market and a monopolistically competitive market is that at the long-run profit maximizing level:
-the ATC of a perfectly competitive firm is at its minimum, while the ATC of a monopolistically competitive firm is not. -the ATC of a perfectly competitive firm is tangent to its demand curve, while the ATC of a monopolistically competitive firm is not.
Refer to the graph shown for a monopolistic firm with demand curve D, marginal revenue curve MR, and marginal cost curve MC. What level of output will the monopolist produce?
4 units
Why is there a first-mover advantage for platform businesses?
The platform becomes more valuable as more consumers use it.
A natural monopoly occurs when indivisible setup costs are so
high that average total costs fall within the range of possible outputs.
If a monopoly is made into a competitive market, output would be
higher and price would be lower.
A monopolist will produce at the point where the marginal cost curve intersects the _____.
marginal revenue curve
Average total costs fall as output increases for a _____.
natural monopoly
The experience of a product becoming more useful as more consumers use it is known as _____.
network externality
At the long-run profit maximizing level for a monopolistic competitor average total costs are
not at their minimum.
Businesses that provide a place for people to interact are known as _____.
platform businesses
In a market with a perfectly price-discriminating monopolist, the welfare loss is captured by the monopolist because its marginal
revenue curve is its demand curve
For monopolistically competitive firms in the long run, profit is
the same as for perfect competitors.
In a market with a price-discriminating monopolist,
there is no welfare loss.
True or false: A primary reason the public doesn't like monopolies is because they redistribute income in ways that are unfavorable to the public.
true
True or false: The primary reason economists don't like monopolies is because they create a welfare loss for society.
true
If price equals average total cost at the profit-maximizing level of output, a monopolist will make
zero profit.
In the long run, a monopolistic competitor makes:
zero profit.
