Pure Monopoly

Producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost

Allocative efficiency

For each of the following markets, determine whether the market can reasonably be characterized as a monopoly: Satellite radio: __________ Wheat: ___________ Cereal: ___________ Tap water in a city: ____________ Admission to Yellowstone park: __________

Sr: Monopoly W: not a monopoly Cereal: Not a monopoly Tap water in a city: monopoly Admission to Yellowstone Park: monopoly

For a monopoly, the marginal revenue is below the demand curve because:

The monopoly has to lower the price on all units to sell more

The _________ curve faced by a pure monopoly is downward sloping

demand

Zero _________ profit is the revenue needed for a company to break even and meet operating costs without a loss.

economic

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

explicit; implicit

For the profit-maximizing level of output, the price charged by a monopoly is not just different but __________ (greater/lower) than marginal revenue

greater

As the market price _________, all else held constant, a profit-maximizing firm can afford to expand its production.

increases

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

loss

Monopolies maximize profits by choosing levels of output __________ (higher/lower) than those found purely competitive markets.

lower

A pure _________ is the only seller in a market

monopoly

The practice of selling the same good or service to different consumer at different prices called

price discrimination

The type of price discrimination that offers two different prices depending on the quantity of units purchased is what type of discrimination?

second degree discrimination

Monopoly is a market structure characterized by:

a single seller, the firm having significant price control, a good or service for which there are no close substitutes

For a monopoly, the marginal revenues per unit fall ________ the price per unit, because when the price ___________ the monopoly gives up some revenue on unit it could have sold at higher prices.

below; falls

The practice of charging different prices per unit for different quantities, or blocks, of a good or service is called

block pricing; second-degree price discrimination

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

Which of the following are characteristics of a perfectly competitive market?

Large number of sellers; No control over price

Extra or additional revenue associated with the production of an additional unit of output.

Marginal revenue

Total revenue equals

Price x Quantity

Using the fewest resources possible to produce a good or service

Productive efficiency

T/F These are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes

True