ECO 202: Chapter 8 Review

raise its price without losing all of its sales.

"Market power" refers to a firm's ability to:

low

A firm is most likely to experience economies of scale if its start-up costs are high and its marginal cost is ______.

natural monopoly.

A monopoly that results from economies of scale is called a(n):

has some degree of control over its price.

A price setter is a firm that:

economies of scale.

According to the textbook, the most important and enduring source of market power is:

it is best to expand production until the benefit and the cost of the last unit produced are equal.

Both a perfectly competitive firm and a monopolist find that:

marginal revenue

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

lower its price.

Given the demand curve it faces, if an imperfectly competitive firm wants to sell another unit of output, it must:

one of a large number of firms that produce goods that are either close or perfect substitutes.

If a firm functions in an oligopoly, it is:

monopolists.

In many cities in the United States, a single firm provides electricity. Those firms are:

high start-up costs and low marginal costs.

Natural monopolies are most likely to arise when firms have:

encourage innovation by helping firms recoup the costs of research and development.

Patents, which confer market power, are intended to:

are the one-time costs incurred when beginning the production of a new product.

Start-up costs:

the marginal benefit from selling an additional unit of output is $5 for the competitive firm and less than $5 for the monopolist.

Suppose a perfectly competitive firm and a monopolist are both charging $5 for their respective products. From this, one can infer that:

faces a downward-sloping demand curve.

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

maximize profit.

The primary objective of an imperfectly competitive firm is to:

produce less than the socially optimal level of output.

The reason economists consider monopoly to be socially undesirable is that monopolists:

total revenue rises; total revenue falls

When a perfectly competitive firm sells additional units of output, ______, and when a monopolist sells additional units of output, ______.

start-up costs; variable costs

When a pharmaceutical company introduces a new drug, its research and development costs are ______, and the cost of the chemicals used in manufacturing the drug are ______.

total revenue is maximized

When marginal revenue is zero:

The only gas station in a small, isolated town

Which of the following firms is most likely to be a pure monopolist?

Fast food restaurants

Which of the following industries does not fit the natural monopoly model?

A computer printer

Which of the following is NOT an example of a good with network economies?