Pure Monopoly
Producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost
Allocative efficiency
For each of the following markets, determine whether the market can reasonably be characterized as a monopoly: Satellite radio: __________ Wheat: ___________ Cereal: ___________ Tap water in a city: ____________ Admission to Yellowstone park: __________
Sr: Monopoly W: not a monopoly Cereal: Not a monopoly Tap water in a city: monopoly Admission to Yellowstone Park: monopoly
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
The _________ curve faced by a pure monopoly is downward sloping
demand
Zero _________ profit is the revenue needed for a company to break even and meet operating costs without a loss.
economic
Total revenue minus the __________ costs and __________ costs of production is economic profit.
explicit; implicit
For the profit-maximizing level of output, the price charged by a monopoly is not just different but __________ (greater/lower) than marginal revenue
greater
As the market price _________, all else held constant, a profit-maximizing firm can afford to expand its production.
increases
The level of profit that occurs when the total revenue is less than the cost is called an economic ___________
loss
Monopolies maximize profits by choosing levels of output __________ (higher/lower) than those found purely competitive markets.
lower
A pure _________ is the only seller in a market
monopoly
The practice of selling the same good or service to different consumer at different prices called
price discrimination
The type of price discrimination that offers two different prices depending on the quantity of units purchased is what type of discrimination?
second degree discrimination
Monopoly is a market structure characterized by:
a single seller, the firm having significant price control, a good or service for which there are no close substitutes
For a monopoly, the marginal revenues per unit fall ________ the price per unit, because when the price ___________ the monopoly gives up some revenue on unit it could have sold at higher prices.
below; falls
The practice of charging different prices per unit for different quantities, or blocks, of a good or service is called
block pricing; second-degree price discrimination
The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the:
Deadweight loss
Which of the following are characteristics of a perfectly competitive market?
Large number of sellers; No control over price
Extra or additional revenue associated with the production of an additional unit of output.
Marginal revenue
Total revenue equals
Price x Quantity
Using the fewest resources possible to produce a good or service
Productive efficiency
T/F These are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes
True