Pure Monopoly

Monopoly yields neither __ efficiency nor __ efficiency

Productive; allocative

__ utilities are government owned or regulated

Public

Which of the following explains why a pure monopolist is able to maintain an economic profit in the long run?

There are no new entrants to increase supply, drive down price, and eliminate profit.

This change in total revenue associated with one-unit change in output is called

marginal revenue

The firm and __ are synonymous in pure monopoly

the industry

A natural monopoly's economies of scale refers to one firm's ability to achieve the lowest long-run average total cost, also known as

the minimum efficient scale at a high level of output

The monopolist seeks maximum __ profit, not maximum unit profit

total

Which of the following describes what "no close substitutes" means as it relates to consumers and a pure monopoly?

A consumer must either buy the monopolized product or do without it entirely.

Pure monopoly

A market structure in which one firm sells a unique product, into which entry is blocked in which a single firm has considerable control over product price, and which non-price competition may not be found.

Which of the following describes why marginal revenue is less than price for monopolists?

Because the lower price of the extra unit of output also applies to all prior units of output.

Simultaneous Consumption

The same-time derivation of utility from some product by a large number of consumers. Also, non-rivalrous consumption

Price discrimination

The selling of a product to different buyers at different prices when the price differences are not justified by differences in cost.

The monopolist's level of output is not at the minimum point of __, meaning it will not be productively efficient

average total cost

A firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it

is found guilty of monopoly abuse.

Which of the following two terms are synonymous in a pure monopoly?

Firm and Industry

If producing its preferable to shutting down. a profit-seeking monopolist will produce up to the output at which

MR=MC

What is the term used to refer to a product's ability to satisfy a large number of consumers at the same time?

Simultaneous Consumption

A __ __ may occur when only a single firm might be able to achieve the lowest long-run average total cost.

Simultaneous consumption

A pure monopoly exists when a single firm is the sole producer of a product for which there are no close

Substitutes

Marginal revenue is the change in __ revenue associated with a single-unit change in output

Total

How much will a profit-seeking monopolist produce if producing is preferable to shutting down?

Up to the output at which marginal revenue equals marginal cost

A monopolist will never choose a price-quantity combination where price reductions cause

a decrease in total revenue

Marginal revenue is less than price at every unit of output because the monopolist

could have sold these prior units at a higher price if it had not produced and sold the extra output.

When a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially__

levies a "private tax" on consumers

A __ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit

monopoly

What is it called when a firm spends significant money to maintain a monopoly through government legislation?

rent-seeking expenditures

Which of the following can cause X-inefficiency?

-Avoiding business risk -Maintaining a poorly motivated work force -Hiring incompetent relatives

Which of the following are characteristics of public utilities?

-Monopolies or near monopolies -Government owned or regulated

Which of the following are assumptions made in the model of pure monopoly?

-No unit of government regulates the firm -Patents, economies of scale, and resource ownership secure the firm's monopoly. -The firm is a single-price monopolist and charges the same price for all units of output.

Which of the following are the main characteristics of a pure monopoly?

-Presence of a single seller -Control over the price -Blocked entry for other firms -Unavailability of close substitutes for its product

Challenging Concept

-Recall that a natural monopoly occurs when only a single firm can achieve the economies of scale necessary to compete in an industry. -Recall that a monopolist will never choose a combination of price and quantity at which price reductions cause total revenue to decrease (marginal revenue is negative.)

A monopolist does not have a supply curve because

-There is no single, unique price associated with each level of output -It does not equate price with marginal cost

Which of the following does the monopolist not have?

A supply curve

Why might a monopolist accept a less-than-maximum per-unit profit?

Additional sales more than compensate for the lower profit per unit

The government broke up Standard Oil due to its breach of __ laws.

Antitrust

Barriers to entry

Anything that artificially prevents the entry of firms into an industry.

Rent-seeking behavior

Attempts by individuals, firms, or unions to use political influence to receive payments in excess of the minimum amount they would normally be willing to accept to provide a particular good or service.

Simultaneous ____________ is a product's ability to satisfy a large number of consumers at the same time.

Consumption

Price makers are firms with

Downward-sloping demand curves

When productive efficiency and allocative efficiency are not achieved in a market, it is called an __

Efficiency loss

The monopolist wants a price-quantity combination to fall in the __ section of its demand curve, where a lower price means __ total revenue

Elastic; greater

Fair-return price

For natural monopolies subject to rate (price) regulation, the price that would allow the regulated monopoly to earn a normal profit; a price equal to average total cost.

How does a monopoly generally transfer income?

From consumer to the owners of the monopoly

X-inefficiency occurs when a firm operates at a cost that is ___ than the lowest cost for a particular level of output.

Higher

Network effects

Increases in the value of a product to each user, including existing users, as the total number of users rises.

Firms with downward-sloping product demand curves are called price

Makers

Patents, economies of scale, and resource ownership are all assumptions of the pure ___ model

Monopolist

Network effects may drive a market toward __, because consumers tend to choose standard products that everyone else is using.

Monopoly

The main characteristics of a pure __ are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.

Monopoly

What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry?

Natural Monopoly

__ effects exist if the value of a product to each user increases as the total number of users increase.

Network

Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely?

No close substitutes

which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes?

Pure monopoly

Which of the following add nothing to the firm's output, but increase the firm's costs?

Rent-seeking expenditures

X-inefficiency

The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output.

Hiring incompetent relatives and poor supervision of workers can result in

X-inefficiency

When a firm produces a specific output level at a higher cost than the necessary cost for that level of output, it's called

X-inefficiency

Because a monopoly is a price maker and prices its products in the elastic portion of the demand curve, its output is less than that required to achieve minimum average total cost. In addition, the monopoly's price will exceed its marginal cost at this level of output. Monopoly therefore creates?

an efficiency loss

Natural monopoly

an industry in which economies of scale are so great that a single firm can produce the industry's product at a lower average total cost than would be possible if more than one firm produced the product

A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the __ __ cost curve.

average total