Microeconomics Ch14

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If a natural monopolist were required to charge a price equal to marginal cost it would make a _____.

loss

If price is less than average total cost at the profit-maximizing level of output, a monopolist will make

loss

A natural monopolist would make a loss if it charged a price equal to _____.

marginal cost

A market structure in which there are many firms selling differentiated products and few barriers to entry is called ___________________ competition.

monopolistic

A market structure in which there are many firms selling differentiated products and few barriers to entry is called _____.

monopolistic competition

With a network externality, a product becomes more beneficial when

more people use it.

A single firm can produce at a lower cost than can two or more firms in a ____________ monopoly.

natural

A single firm can produce at a lower cost than can two or more firms in the case of a(n) _____.

natural monopoly

If a monopolist takes over what had been a competitive market

price will rise. output will fall.

If price exceeds average total cost at the profit-maximizing level of output, a monopolist will make

profit

A platform business is a business that

provides a place for people to interact.

A monopolistic competitor

takes into account the effect that increasing output has on marginal revenue.

Output would be lower and price would be higher if a competitive market is made into a monopoly because a monopolist

takes into account the effect that restricting output has on price

The marginal revenue curve for a monopolist is

the additional revenue the firm will get by expanding output.

True or false: A key difference between monopolists and perfect competitors is that a perfectly competitive firm's marginal revenue is the given market price, whereas a monopolist's marginal revenue is not its price.

true

True or false: A monopolistic competitor takes into account the effect that increasing output has on marginal revenue.

true

Refer to the graph above for a monopolistic competitor with demand curve D, marginal revenue curve MR, and marginal cost curve MC. What level of output will the firm produce?

4 units

If a monopolistic competitor is incurring a loss, which of the following adjustments may occur in the long run?

-The average total cost curve shifts downwards as the firm contracts marketing expenditures. -Existing firms exit the market.

If a monopolistic competitor is making a profit, which of the following adjustments may occur in the long run?

-The average total cost curve will shift upwards as the firm expands marketing expenditures to protect its market share. -New firms enter the market

The key differences between a monopolist and a perfect competitor is that:

-a monopolist takes into account the fact that its output decision can affect price. A perfect competitor does not. -a monopolist is protected by barriers to entry. A perfect competitor is not. -as the number of units a monopolist sells increases, the price it can get for those units falls. A perfect competitor cannot affect market price.

Characteristics of monopolistic competition include:

-differentiated products. -many sellers.

Characteristics of monopolistic competition include:

-easy entry of new firms in the long run. -multiple dimensions of competition.

When MC = MR, the monopolist is maximizing profit because

-if MR < MC, the monopolist gains profit by decreasing output. -if MR > MC, the monopolist gains profit by increasing output.

A price-discriminating monopolist would charge consumers with

-more elastic demands a lower price. -less elastic demands a higher price.

Platform businesses earn income from:

-selling ad space. -selling data on its users.

Refer to the graph shown for a monopolist. What is the welfare loss from the monopoly?

B and D

Refer to the graph shown for a monopolistic firm with demand curve D, marginal revenue curve MR and marginal cost curve MC. What price will the monopolist charge for its products?

$15

The profit maximization rule for a monopolist is _____.

MC=MR

Refer to the graph shown. The correct marginal revenue curve for the given demand curve D is _____.

MR2

Which of the following types of firms can earn a profit in the long run?

Monopolist

Refer to the graph shown for a monopolist firm facing demand curve D, marginal revenue curve MR, marginal cost curve MC and average total cost curve ATC. Which region represents the profit that the monopolist makes?

None of the regions shown

Which of the following firms in long-run equilibrium, produces at the point where average total costs are minimum?

Perfect competitor

In the long run

a monopolist can earn a profit while a monopolistic competitor cannot.

Which of the following are not barriers to entry in a monopoly?

Diseconomies of scale Differentiated products

Which of the following firms is most likely to exhibit network externalities?

Facebook

Refer to the graph shown for a monopolist firm facing demand curve D, marginal revenue curve MR, marginal cost curve MC and average total cost curve ATC. Which region represents the profit that the monopolist makes?

Regions I and II

Which of the following is most likely to exhibit network externalities?

Social networks

Refer to the graph shown, which compares the long-run equilibrium for a perfect competitor on the left to a monopolistic competitor on the right. What mistakes are there in the graphs?

The ATC curve for the monopolistic competitor is tangent to its marginal revenue curve.

The marginal revenue curve of a monopolistic competitor is

below the demand curve.

In the long run, profit is zero for

both perfectly and monopolistically competitive firms

A monopolist

can earn a profit, zero profit, or even incur a loss.

When MC > MR, the monopolist will

decrease output.

As output increases, marginal revenue of a monopolist

decreases

A monopolist producing at the profit-maximizing level of output represented in the graph shown is earning

economic profit.

To raise profits a price-discriminating monopolist would charge different prices to different consumers based on their

elasticities of demand.

A monopolist's marginal revenue is always less than the price it receives because the price it receives for its product

falls for all units as it increases output.

True or false: A monopolist's marginal revenue is always above its price because to sell more it must lower its price.

false

True or false: A platform businesses do not earn income since their services are free.

false

True or false: Compared to a perfectly competitive market, in a monopoly, output is higher and price is lower because a monopoly takes into account the effect that restricting output has on marginal product.

false

True or false: For a monopolistic competitor, the marginal revenue curve is above the demand curve.

false

True or false: In the long run, a monopolistic competitor incurs a loss.

false

True or false: Refer to the graph shown. MR correctly represents the marginal revenue curve for the given demand curve, D.

false

True or false: The marginal revenue curve for a monopolist reflects the increase in the price the firm will get by expanding output.

false

One objective a firm that would like to benefit from a first-mover advantage is to

gain as many customers as possible quickly.

When MC = MR, the monopolist

has no incentive to change its output.

When MC < MR, the monopolist will

increase output

As output decreases, marginal revenue of a monopolist

increases

When MC < MR, the monopolist will increase output because

increasing output increases total profit.

A price discriminating monopolist charges different prices for different _____.

individuals

Which of the following are barriers to entry in a monopoly?

-Economies of scale -Government restrictions -Natural ability

The difference between the average total cost curve in a perfectly competitive market and a monopolistically competitive market is that at the long-run profit maximizing level:

-the ATC of a perfectly competitive firm is at its minimum, while the ATC of a monopolistically competitive firm is not. -the ATC of a perfectly competitive firm is tangent to its demand curve, while the ATC of a monopolistically competitive firm is not.

Refer to the graph shown for a monopolistic firm with demand curve D, marginal revenue curve MR, and marginal cost curve MC. What level of output will the monopolist produce?

4 units

Why is there a first-mover advantage for platform businesses?

The platform becomes more valuable as more consumers use it.

A natural monopoly occurs when indivisible setup costs are so

high that average total costs fall within the range of possible outputs.

If a monopoly is made into a competitive market, output would be

higher and price would be lower.

A monopolist will produce at the point where the marginal cost curve intersects the _____.

marginal revenue curve

Average total costs fall as output increases for a _____.

natural monopoly

The experience of a product becoming more useful as more consumers use it is known as _____.

network externality

At the long-run profit maximizing level for a monopolistic competitor average total costs are

not at their minimum.

Businesses that provide a place for people to interact are known as _____.

platform businesses

In a market with a perfectly price-discriminating monopolist, the welfare loss is captured by the monopolist because its marginal

revenue curve is its demand curve

For monopolistically competitive firms in the long run, profit is

the same as for perfect competitors.

In a market with a price-discriminating monopolist,

there is no welfare loss.

True or false: A primary reason the public doesn't like monopolies is because they redistribute income in ways that are unfavorable to the public.

true

True or false: The primary reason economists don't like monopolies is because they create a welfare loss for society.

true

If price equals average total cost at the profit-maximizing level of output, a monopolist will make

zero profit.

In the long run, a monopolistic competitor makes:

zero profit.


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