Week 11 Pure Monopoly

the monopoly out put level is ______ units; and the price charged by the monopoly is $_____

-400 units (MC+MR) -$60 (price of demand when MC+MR)

a business will charge a ______ price to the group with the relatively more elastic demand and a ________ price to the group with the relatively more inelastic demand

-lower (elastic) -higher (inelastic)

For a monopoly, the ________ revenue curve is located below the _________ curve

-marginal revenue -demand

to affect the quantity demanded by consumers, as the only supplier in the market, a _________ must change the ________ of its products, which also affects total revenue and marginal revenue

-monopoly -price

pure monopolies do not achieve allocative efficiency, meaning that they do not produce the amount of output that maximizes the sum of ____ and ____ surplus

-producer -consumer

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

-second-degree price discrimination -block pricing

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

-second-degree price discrimination -block pricing

Price discrimination has 3 conditions:

1. Ability to charge prices above MC 2. 3.

Price discrimination has 3 types

1. First degree (perfect) 2. Second degree (indirect) 3. Third degree (direct)

Differences in demand

Are not price discrimination

productive efficiency

Producing output at the lowest possible average total cost of production; using the fewest resources possible to produce a good or service.

price discrimination

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

Young women pay less than young men for car insurance

This is not price discrimination

by charging consumers the highest price they are willing and able to pay, ________ extracts all surplus from consumers, yielding higher profits than any other pricing method available to the firm

a pure monopoly

when output is produced so that the marginal benefit equals the marginal cost, there is _____ efficiency

allocative

in a pure monopoly, the firm is willing to sell to anyone willing and able to pay at least the marginal cost of production. the result is that output is produced where D+MC which is _________ efficient

allocatively

second-degree price discrimination is also known as __________ pricing

block

second-degree price discrimination is also known as

block pricing

in economics, we refer to a situation in which there is only one firm but no real barriers to entry as a _______ market

contestable

the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the _____ loss

deadweight

the marginal revenue (MR) curve becomes the supply curve then,

demand (D)=marginal revenue (MR) occurs because the marginal revenue generated with each additional unit sold is equal to the price the pure monopoly can charge for it

the marginal revenue is the:

extra or additional revenue associated with the production of an additional unit of output

by charging consumers the highest price they are willing an able to pay, the pure monopoly

extracts all surplus from consumers

perfect price discrimination and personal pricing are different names for

first-degree price discrimination

the monopoly will charge a higher price in the market with the relatively more _____ demand curve

inelastic

price discrimination is only possible when a firm is a price ________

maker

to maximize profits = the monopoly output level

marginal cost = marginal revenue (MC=MR)

a monopoly should produce output until the marginal _______ equals the marginal _______

marginal revenue and marginal cost (MR=MC)

pure monopoly

might practice second-degree price discrimination

_____ reduces the availability of goods and services and consumers' ability to buy those goods

monopolies

a market structure characterized by a single seller is a __________

monopoly

it is unlikely for a pure _______ to be productively efficient

monopoly

perfect price discrimination generates the best outcome for which of the following market structures?

monopoly

a pure monopoly is a price maker engaging in ________ competition

nonprice

the allocatively efficient level of output

occurs where P =MC

first-degree price discrimination is also known as

perfect price discrimination or personal pricing

block pricing

practice of charging different prices per unit for different quantities or "blocks" of a good or service

second degree price discrimination

practice of charging different prices per unit for different quantities, or blocks of a good or service. also known as block pricing

if a monopoly wants to sell more units, it must lower the _____ for every unit it sells

price

the practice of selling the same good or service to different consumers at different prices is called

price discrimination

the practice of selling the same good or service to different consumers at different prices is known as:

price discrimination

total revenue equals

price multiplied by quantity

allocative efficiency

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

________ efficiency is producing output at the lowest possible average total cost of production

productive

Total ________ equals price times quantity

revenue

Marginal Revenue (MR)

the change in a firm's total revenue that results from a 1-unit change in output produced and sold

marginal revenue is

the change in total revenue divided by the change in output

when a pure monopoly practices first-degree price discrimination,

the demand curve becomes the marginal revenue (MR) curve

the price charged by the monopoly is

where MC=MR at the price of the demand curve

the allocatively efficient level of output is located

where the marginal cost curve (MC) intersects with the demand curve (D)

by charging consumers the highest price they are willing able to pay, the pure monopoly extracts all surplus from consumers

yielding HIGHER profits than any other pricing method available to the firm

which of the following are characteristics of a contestable firm?

-no real barriers to entry -a single firm

because monopolies have market power and can influence the price of the goods they sell, they tend to restrict _______ and charge a higher ______ than would prevail in a competitive equilibrium

-output -price

productive efficiency is:

using the fewest resources possible to produce a good or a service

there are important exceptions which monopolies are actually encouraged to incentivize positive outcomes

true

for each of the following markets, determine whether the market can reasonably be characterized as a monopoly

the electricity board of a state - monopoly wheat - not monopoly cereal- not monopoly tap water in a city - monopoly admission to yellowstone park - monopoly

deadweight loss

the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

the pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs which of the following?

-first-degree price discrimination -perfect price discrimination -personal pricing

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

-large number of sellers -no control over price