Pure Monopoly

first-degree price discrimination is the practice of charging the maximum possible price for each unit which enables the firm to capture maximum ____ for itself

consumer surplus

marginal revenue

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

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 barriers to entry

monopoly is a market structure characterized by

a market with barriers to entry a good or service for which there are no close substitutes a single seller the firm having significant price control

regulated normal profit price

a regulated price that is equal to the average total cost of production

regulated competitive price

a regulated price that is equal to the marginal cost of production can be found where the marginal cost curve intersects the demand curve, and it is allocatively efficient.

characteristics of contestable firm

a single firm no real barriers to entry

economies of scale

a situation in which the average total cost of production decreases as output increases

the competitive price can be found where the marginal cost curve intersects the demand curve, and it's

allocative efficiency

normal profit is

also known as zero economic profit

natural monopoly

an industry in which economies of scale are so extensive that the market is better served by a single firm

barriers to entry

any impediments that prevent firms from entering a market or industry

the difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not equilibrium is

deadweight loss

normal price can be found where the average total cost curve intersects the

demand curve

consumer surplus

difference between the maximum price consumers are willing and able to pay for a good or a service and the price they actually pay

perfect price discrimination

different names for first-degree price discrimination

a business will charge a lower price to the group with the relatively more (elastic/inelastic) demand a higher price to the group with the relatively more (elastic/inelastic) demand

elastic inelastic

what usually regulates monopolies because they want to achieve a competitive outcome, or lower prices

governments

for the profit-maximizing level of output, the price changed by a monopoly is not just different but (greater than/less than) marginal revenue

greater than

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

highest

characteristics of a perfectly competitive market

large number of sellers no control over price

when a firm has a loss, the total revenue is (greater than/less than) the total cost

less than

When a pure monopoly practices first-degree price discrimination, the demand cruve becomes the

marginal revenue curve

a person who invents the ability to time-travel will likely operate as a ______ , since there would be no substitutes and entering that market would be difficult for anyone else

monopoly

for a ______ , the marginal revenue curve is located below the demand curve

monopoly

the economies of scale in ____ are so extensive that the market is better served by a single firm

natural monopolies

the practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes (3)

personal pricing first-degree price discrimination perfect price discrimination

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

personal pricing first-degree price discrimination perfect price discrimination

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

personal pricing first-degree price discrimination perfect price discrimination

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

price

to calculate the profit, which three pieces of information need to be identified

price average total cost quantity of output

a monopoly is a

price maker

price discrimination is only possible when a firm is a _____

price maker

total revenue equals

price per unit times quantity sold

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

second-degree price discrimination is most commonly done by a

pure monopoly

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

monopoly power

the ability of a monopoly to influence prices by controlling the quantities that it produces in the market

total revenue minus

the implicit costs and explicit costs of production is economic profit

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.

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 than total cost

when regulators require a monopoly to charge the normal profit price

the monopoly has little incentive to reduce its costs of production the monopoly has zero economic profit

first-degree price discrimination

the practice of charging every consumer the price that she is willing and able to pay for something

profit discrimination

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

unregulated monopoly price

the profit-maximizing price that will result from an unregulated monopolistic market

economic profit equals

total revenue minus the implicit costs and explicit costs of production

price equals

total revenue minus the total cost

profit equals

total revenue minus the total cost

(t/f) natural monopolies are rare and tend to be regulated by the government

true

(t/f) there are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes

true

profit maximization

implies that monopoly firms should expand production up to the point where the marginal revenue equals the marginal cost

if the marginal revenue associated with selling one more unit of output is positive, the demand is elastic, because this would (decrease/increase) total revenue

increase

deadweight loss

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

second-degree price discrimination (block pricing)

when a firm is charging different prices per unit for different quantities, or blocks, of a good or service

price discrimination

best described as the practice of selling the same good or service to different consumers at different prices

perfectly competitive market

characterized by a large number of sellers producing a standardized product and taking the market price as given, with easy entry and exit into the market