Pure Monopoly - Exam 3
when regulators require a monopoly to charge the normal profit what 2 things happen?
1. monopoly has zero economic profit 2. monopoly has little incentive to reduce its costs of production
monopolies are allocatively efficient (T/F)?
false
economies of scale is not a barrier to entry (T/F)?
false, it is a barrier
perfect price discrimination and personal pricing are different names for
first-degree price discrimination
If a monopoly is able to perfectly price discriminate, then consumer surplus is...
0
if a monopoly perfectly price discriminates, how much deadweight loss will they incur?
0
To be able to price discriminate, a firm must do 3 things?
1. segment market 2. sell product that can't be resold 3. be a price maker
Perfect price discrimination results in
allocative efficiency
when a pure monopoly practices first-degree price discrimination....
demand curve becomes the marginal revenue curve
the demand faced by a pure monopoly is _________ sloping
downward
a monopoly generally makes what kind of profits in the long run
economic profits
monopolies are price _______
makers
monopolies experience deadweight loss (T/F)?
true
monopolies have barriers to entry (T/F)?
true
any impediments that prevent firms from entering a market
barriers to entry
If a monopoly is able to price discriminate, then both its profits and output tend to _________
increase
if a market has no impediments to entry, is it a monopoly?
no
can wheat be considered a monopoly?
no, many different producers of wheat
marginal revenue is the extra revenue associated with the production of an additional unit of...
output
firm charges different prices for the same good to different consumers though there is no difference in the cost to supply it to consumers
price discrimination
efficient level of output allocation is where on the graph?
where MC = D