PCE-8B, smartbook chapter 12
It is difficult to start up a major league sports team because existing professional teams have contracts with the best players and long-term leases on stadiums. Which barrier to entry does this illustrate?
Control of a key resource
If producing is preferable to shutting down, a profit-seeking monopolist will produce up to the output at which ____
MR = MC
Which of the following is considered a barrier to entry into an industry?
Ownership of essential property
as an example of price _discrimination_,airlines charge higher fares to business travelers whose demand for travel is price _inelastic_ and lower more restricted fares to attract vacationers and other with price _elastic_ demand.
discrimination, inelastic, elastic
Price makers are firms with:
downward-sloping demand curves
The monopolist wants a price-quantity combination to fall in the _____ section of its demand curve, where a lower price means _____ total revenue.
elastic; greater
true or false: a firm is producing 24 units of output. At the 24th unit of output, marginal revenue is $5, and marginal cost is $4; at the 25th unit of output, marginal revenue is $4.50, and marginal cost is $4.50; at the 26th unit of output, marginal revenue is $4, and marginal cost is $5. This firm made the correct choice by producing only 24 units of output and then stopping.
false
true or false: a monopolist will always charge the highest price possible.
false
true or false: a monopolist will change the highest price possible.
false
true or false: economists agree that government should eliminate all monopolies
false
true or false: price discrimination is always legal in the United States.
false
declines in long-run average total costs occur due to which of the following:
greater use of specialized inputs simultaneous consumption learning by doing network effects spreading of product development costs
X-inefficiency occurs when a firm operates at a cost that is
higher
the price discriminator's total profit is _higher_ than it would be with no discrimination
higher
a firm with price discrimination power will charge a _____ price to customers who have less elastic demand and a ____ price to customers with more elastic demand.
higher, lower
a firm with price discrimination power will charge a _higher_ price to customers who have less elastic demand and a _lower_ price to customers with more elastic demand
higher; lower
compared to a pure competitor, a monopolist finds it profitable to charge a _higher_ price and supply a _lower_ quantity
higher; lower
when a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially levies a "private tax" on consumers. the owners of the monopoly benefit from these transactions at the expense of the consumer. this is an example of a monopoly contributing to
income inequality
which of following types of firms have achieved economies of scale through information technologies?
internet service, computer software, wireless communication
a firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it
is found guilty of antitrust violations
Government creates BLANK barriers to entry.
legal
the price-discriminating monopolist charges a higher price to customers who have __ elastic demand and a lower price to customers who have a __elastic demand
less; more
When a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially ______.
levies a "private tax" on consumers
competition from multinational corporations ____ the market power if firms in the United States.
limits
the owners of a monopoly, when faced with continuing losses, will move their resources to alternative industries in the _long_ run
long
in a monopoly, the average total cost of output declines as more customers are added because:
marginal costs are low with simultaneous consumption
Firms with downward-sloping product demand curves are called price
markers
A(n) ______ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit.
monopoly
Patents, economies of scale, and resource ownership are all assumptions of the pure BLANK model
monopoly
Slashing prices is an example of an entry barrier created by a(n)
monopoly
network effects may drive a market toward _monopoly_, because consumers tend to choose standard products that everyone else is using.
monopoly
which of the following are conditions necessary for price discrimination?
monopoly power, no resale, market segregation
Patents, economies of scale, and resource ownership are all assumptions of the pure BLANK model
monpoly
_______ effects exist if the value of a product to each user increases as the total number of users increase.
network
a monopolist must obtain a minimum of a(n) _normal_ profit in the long run, or it will go out of business
normal
in the long run, only ______ for a pure competitor are possible, whereas a monopoly earns _____.
normal profits; economic profits
The strongest barriers to entry effectively block all ______.
potential competition
at a pure monopolist's profit-maximizing output, its _price_ exceeds marginal cost, resulting in allocative inefficiency.
price
Market segregation must exist in order for a monopolist to ______.
price discriminate
a russian aluminum producer selling aluminum for less in the united states than in russia because demand in the United States is elastic, whereas in Russia is less elastic is an example of __ in international trade
price discrimination
baseball ticket sellers charge a different price for adults and children. ballpark concession stands charge the same price for products sold to any customer. the baseball ticket sellers are providing a successful example of
price discrimination
economic profit for a monopolist can be calculated by multiplying the difference between _____ and _____ total cost by quantity.
price, average
in the price discrimination, the price differences are not justified by _cost_ differences
cost
efficiency loss is also known as ____ loss
deadweight
efficiency loss is also known as _deadweight_ loss.
deadweight
Which of the following does the monopolist not have?
A supply curve
Why might a monopolist accept a less-than-maximum per-unit profit?
Additional sales more than compensate for the lower profit per unit.
What is the term for factors that prohibit firms from entering an industry?
Barriers to entry
The government broke up Standard Oil in 1911 due to its breach of
Blank 1: antitrust or anti-trust
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the BLANK cost curve
Blank 1: average Blank 2: total
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the BLANK cost curve.
Blank 1: average Blank 2: total
The practice of charging different prices to different buyers for a specific product is known as price
Blank 1: discrimination
The change in total revenue associated with a one-unit change in output is called BLANK monopoly
Blank 1: marginal
a firm positions itself in the best profit-maximizing (or loss-minimizing) level of production if that amount of output reflects the point at which the last unit's marginal revenue is equal to its marginal cost because
Each unit of output prior to the MR=MC rule earns more revenue for the firm than its costs Each unit of output after the MR=MC amount will earn less revenue than its costs
What term is used to describe declining average total costs with added firm size?
Economies of scale
How does a monopoly generally transfer income?
From consumers to the owners of the monopoly
______ create(s) legal barriers to entry.
Government
Which of the following are characteristics of public utilities?
Government owned or regulated Monopolies or near monopolies
Economies of scale refer to ______ average total costs with added firm size.
declining
Which of the following are entry barriers created by monopolists?
Price reductions Increased advertising
BLANK utilities are government owned or regulated.
Public
Which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes?
Pure monopoly
Which of the following are assumptions made in the model of pure monopoly?
The firm is a single-price monopolist and charges the same price for all units of output. No unit of government regulates the firm. Patents, economies of scale, and resource ownership secure the firm's monopoly.
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then which of the following may occur?
The firm may be broken into two or more competing firms. The firm may be expressly prohibited from engaging in certain business activities.
Which of the following explains why a pure monopolist is able to maintain an economic profit in the long run?
There are no new entrants to increase supply, drive down price, and eliminate profit.
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
Up to the output at which marginal revenue equals marginal cost.
When a firm produces a specific output level at a higher cost than the necessary cost for that level of output, it is called ______.
X-inefficiency
A monopolist will never choose a price-quantity combination where price reductions cause:
a decrease in total revenue
a monopolist will not seek the highest price possible because
a monopolist seeks maximum profits, not maximum price
which of the following can increase profits by charging different prices to different buyers?
a monopoly
which of the following may make a pure monopoly unsustainable over the long-run?
a new technology
in the long run, a monopolist must obtain a minimum of _____ to prevent going out of business.
a normal profit
why might a monopolist seek a less-than-maximum per-unit profit?
additional sales (quantity) more than compensate for the lower unit profit
at the profit-maximizing (loss-minimizing) output for a monopoly, if average revenue is less than average total cost, then the monopoly is experiencing
an economic loss
monopoly is a legitimate concern because monopolists can charge higher-than-competitive prices that result in
an underallocation of resources to the monopolized product
_antitrust_ laws are applied to a firm that engages in anti-competitiveness and creates substantial economic inefficiency.
antitrust
a government policy option for dealing with monopoly is to file charges against the monopoly under _antitrust_ laws.
antitrust
the government broke up Standard Oil In 1911 due to its breach of _antitrust_ laws
antitrust
a monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the _average_total_ cost curve
average total
he monopolist's level of output is not at the minimum point of ______, meaning it will not be productively efficient.
average total cost
A monopolist does not have a supply curve because:
b) it does not equate price with marginal cost c) there is no single, unique price associated with each level of output
which of the following are reasons monopoly is not widespread in the United States?
barriers to entry are seldom completely successful patents eventually expire
which of the following is a reason for a monopoly's loss of economic profit?
changes in tastes that reduce demand for a product
a monopolist can increase its profit by
charging different prices in different markets
a monopolist can increase its profit by ______.
charging different prices to different buyers
a firm's manager is given the following information: To sell 4 units of output, a price of $132 must be charged; this level of output reflect marginal revenue of $102 and marginal costs of $60. If the firm wants to sell 5 units of output, a price of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $112 must be charged; 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
Microsoft is a firm that benefits from __ consumption.
simultaneous
A pure monopoly exists when a single firm is the sole producer of a product for which there are no close ___.
substitutes
Marginal revenue is the change in ______ revenue associated with a single-unit change in output.
total
The monopolist seeks maximum BLANK profit, not maximum unit profit.
total
the monopolist seeks maximum _total_ profit, not. maximum unit profit
total
due to __, it has become trendy for federal, state, and local governments to abandon price regulation if the possibility of competition looks promising.
x-inefficiencies