Econ Chapter 12
calculating revenue on price by quantity graph
price times quantity
When comparing the graph of your ATC curve for a natural monopoly with that of a firm in perfect competition, we see that ____________.
A natural monopoly has a downward-sloping ATC curve, while a firm in perfect competition has a U-shaped curve.
Which of the following are properties of a monopoly? (Check all that apply.) Part 2 A. There are a few close substitutes for the goods and services produced. B. There are high barriers to entry. Your answer is correct. C. Price-maker. Your answer is correct. D. There is only one seller. Your answer is correct. E. Price-taker.
B) there are high barriers to entry C) Price-maker D) There is only one seller
Which of the following best describes network externalities? A) They are the benefits to a firm from increasing its online presence. B) They occur when a firm hires an outside company to help lower its costs. C) They occur when a product's value increases as more consumers begin to use it. D) They are the benefits received by other firms from the actions taken by a monopolist.
C) They occur when a product's value increases as more consumers begin to use it.
Which of the following is not one of the sources of natural market power? A) Controlling a key resource B) The presence of economies of scale C) Having individual expertise in a field D) Production of a luxury good
D) Production of a luxury good
What is the slope for the ATC for a natural monopoly?
Downward slope
Suppose a monopolist faces the linear demand curve: P=a−bQ, where a is the point where the demand curve touches the y-axis and b represents the slope of the demand curve. Given this equation, which of the following represents the monopolist's marginal revenue?
MR = a - 2bQ
How does the marginal revenue and demand curve result in a revenue curve?
MR is steeper than D, but starts at same Y intercept. We see that the X intercept of MR = the max quantity for max revenue in TR v Q graph, which is a concave down parabola, since the TR diminishes after reaching the vertex.
Calculating change in total rev (ie if price is increased or decreased)
Rev of price A (PxQ) - Rev price B (P2xQ2) abs value bc its the diff
How would the ATC for a firm differ if the market consisted of only one large firm compared to a market with many small firms? Using the graph, a firm with that type of cost curve is best suited to be ___________.
The graph is downward sloping for ATC> The competition cost will be much higher and have less quantity, ie higher on the slop curve left and up. The monopoly will have a higher quantity for a lower cost, or lower on the slope to the right and down. a natural monopoly, since it faces economies of scale and can produce at a lower cost if done by one firm.
Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR) for a monopolist?
When MR is positive, TR is rising, and when MR is negative, TR is falling. (but this graph would have total rev on y axis and quantity on x axis i just dont have quizlet premium)
Natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
price effect
after a price increase, each unit sold sells at a higher price, which tends to raise revenue
quantity effect
after a price increase, fewer units are sold, which tends to lower revenue
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
natural market power
occurs when a firm obtains market power through barriers to entry created by the firm itself
Suppose as creative college students you and your friends develop software that for a small fee helps students choose courses based on professors' ratings and grade distributions, and it becomes an instant hit around campus. You decide to patent your software and license its use to a large tech firm who agrees to pay you 5 percent of all revenue earned. For example, if the tech firm sells 200 subscriptions at $10 each, it will have revenue of $2,000, meaning you will earn 5 percent of that total, or $100. The tech firm's goal is to maximize profits, while your goal as a license holder is to maximize total revenue. Given this information, what do we know about the price of the good?
you prefer P1, but the tech firm prefers P2. This is because the tech firm will
