Econ, Pure Monopoly
Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:
$1.50.
Firms use price discrimination to:
increase their profits
The price that occurs where the demand and the marginal cost curves cross is called the:
regulated competitive price.
When a firm has a loss, the total ________ is less than the total ______
revenue, cost
Monopoly Power
the ability of a monopoly to influence prices by controlling the wquantities that it produces in the market
Marginal Revenue (MR)
the change in a firms total revenue that results from a one-unit change in output produced and sold
For a monopoly, the marginal revenues per unit fall ____ the price per unit because when the price ______, the monopoly gives up some revenue on units it could have sold at higher prices.
Blank 1: below or under Blank 2: drops, lowers, reduces, declines, decreases, or falls
Monopolies do not achieve allocative efficiency because they do not produce in such a way that their price or marginal ____ equals their marginal _____
Blank 1: benefit, benefits, or revenue Blank 2: revenues, cost, or costs
The regulated______price is allocatively efficient.
Blank 1: competitive
A perfectly competitive market is characterized by a large number of sellers producing a standardized product and taking the market price as given with easy ____ and ______ into the market.
Blank 1: entry, entering, or entrance Blank 2: exit, exiting, or exits
The level of profit that occurs when total revenue is ____ to total cost is known as normal profit.
Blank 1: equal, =, the same as, or identical
A business will charge a(n) ______price to the group with the relatively more elastic demand and a(n) _______ price to the group with the relatively more inelastic demand.
Blank 1: lower, low, smaller, lesser, or cheaper Blank 2: discounted, higher, larger, greater, or high
If the marginal revenue associated with selling one more unit of output is positive, the demand is:
If the marginal revenue associated with selling one more unit of output is positive, the demand is:
If you live in a town or a city that has a single provider of electricity or natural gas, then that natural monopoly provider:
If you live in a town or a city that has a single provider of electricity or natural gas, then that natural monopoly provider:
Profit Maximizing Rule
MR = MC
profit maximizing rule
MR = MC
Perfect price discrimination generates the best outcome for which of the following market structures?
Monopoly
Compared to an unregulated natural monopoly, what is true about the price charged and quantity produced when a natural monopoly is regulated?
Price is lower and Quantity is higher
Total Revenue (TR)
Price x Quantity
normal Profit
The level of profit that occurs when total revenue is equal to total cost. This level indicates that a firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or compete in a different industry. Normal profit is also known as zero economic profit.
price discrimination
The practice of selling the same product to different resellers (wholesalers, distributors, or retailers) or to the ultimate consumer at different prices; some, but not all, forms of price discrimination are illegal.
The price that occurs where the demand and the average total cost curves cross is called the:
The price that occurs where the demand and the average total cost curves cross is called the:
The extra or additional revenue associated with the production of an additional unit of output is the _____ revenue
marginal
Barriers to Entry
any impediments that prevent firms from entering a market or industry
The allocatively efficient price can create a dilemma for regulators when:
the average total cost associated with the competitive quantity is higher than the price the natural monopoly is able to charge for it.
When a pure monopoly practices first-degree price discrimination,:
the demand curve becomes the marginal revenue curve.
economic profit
the level of profit that occurs when total revenue is greater than total cost
loss
the level of profit that occurs when total revenue is less that total cost
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.
second degree price discrimination
the practice of charging different prices per unit for different quantities, or blocks, of a good or service. Also known as block pricing
third degree price discrimination
the practice of dividing market participants into groups based on their elasticities of demand in order to charge each group a different price for the same good or service
unregulated monopoly price
the profit-maximizing price that will result from an unregulated monopolistic market
Deadweight loss
the value of economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium
Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:
$2.50.
Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:
$250.
regulated competitive price
A regulated price that is equal to the marginal cost of production. The competitive price can be found where the marginal cost curve intersects the demand curve, and it is allocatively efficient.
Economies of Scale
a condition in which the long-run average total cost of production decreases as production increases
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
regulated normal profit price
a regulated price that is equal to the average total cost of production. the normal profit price can be found where the average total cost curve intersects the demand curve
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
natural monopoly
an industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than would be possible if more than one firm produced the product
If the government forces the monopoly to sell at a price equal to the marginal cost the natural monopoly would charge the regulated_____price
competitive
In economics, we refer to a situation in which there is only one firm but no real barriers to entry as a(n) ______ market.
contestable
A monopoly will charge consumers the price that they are willing and able to pay for the amount of output available which is shown along the _____ curve.
demand
The practice of selling the same good or service to different consumers at different prices is called price
discrimination
Total revenue minus the implicit costs and explicit costs of production is _____ profit
economic
The marginal revenue is the:
extra or additional revenue associated with the production of an additional unit of output.
Due to the market inefficiencies created by _______, one of the roles of government is to limit their market power or even to eliminate them entirely. (Use only one word to fill in the blank.)
monopolies
A profit-maximizing ______ will always operate on the elastic portion of a linear demand curve.
monopolist
A(n)___produces less output than a competitive firm and therefore is likely to hire less labor.
monopoly
A pure monopoly is a price maker engaging in ____ competition
nonprice
If the government forces the monopoly to sell at a price equal to the average total cost, the natural monopoly would make a(n) _____ profit.
normal
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
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.
productive efficiency
producing output at the lowest possible average total cost of production; using the fewest resources possible to produce\ a good or service
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
All firms maximize _____ by producing the quantity of output at which the marginal revenue is equal to the marginal cost.
profit
Monopoly
A market structure characterized by a single seller, producing a good or service for which there are no close substitutes, in a market with relatively blocked entry. A monopoly is a price maker
The practice of charging each and every consumer the price she is willing and able to pay for a good or service describes:
first-degree price discrimination. personal pricing. perfect price discrimination.
The level of profit that occurs when the total revenue is less than the total cost is called an economic
loss
When a regulated price results in a(n) _______, the government is likely to subsidize a natural monopoly.
loss
Price discrimination is only possible when a firm is a price
maker
_____equals the total revenue minus the total cost. (Use one word to fill in the blank.)
profit
Natural monopolies are rare and tend to be regulated by the government. (True or False)
true
There are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes.
true
Government regulation of natural monopolies can take several forms such as imposing a(n) ___profit price or a(n) _______ price. (Use one word per blank.)
Blank 1: normal Blank 2: competitive
Governments usually _______ monopolies because they want to achieve a competitive result or lower prices.
Blank 1: regulate or regulates