Chapter 10: Monopoly
patent
a temporary grant of monopoly rights over a new product or scientific discovery that lasts about 20 years
MR
a the perfect price discriminator the _____ curve is the same as the demand curve
no close substitutes
"___________" decides whether or not a firm or market is a monopoly
network externalities
additional benefits enjoyed by all users or a good or service because others use it as well
price discrimination
charging different prices to different consumers based on differences in the prices consumers are willing to pay
perfect price discrimination
charging each customer the most he or she would be willing to pay for each unit purchased
price setting constraints
determined by the given market demand curves a monopoly faces and the tradeoff (i.e the more it charges for a product, the fewer units it will be able to sell)
production costs contraints
determined by the monopoly's production technology and by the prices it must pay for its inputs
downward
economies of scale in production causes a firm's LRATC curve to slope ___________
P - ATC
formula for profit per unit
will
monopolies ______ earn economic profit in the long run equilibrium
enter; economic profit; unable; does not
new firms will want to ______ an industry when a monopoly is earning __________ but will be _______ to do so; the market (does/ does not) provide mechanisms to eliminate monopoly profit
price
once the firm has determined its output level it has also determined its ______
output level
once the firm has determined its price, is has also determined its ________
will not
perfectly competitive firms _______ earn a profit in the long run equilibrium
into; increasing
profit attracts new firms _____ the market, ________ market production and causing the market price to fall eliminating any temporary profit earned by a competitive firm
market power
the ability of a seller to raise price without losing all demand for the product being sold
less; AVC; MR=MC
a monopoly will shut down if P is _______ than ______ where ________
higher; lower
ALL ELSE EQUAL, a monopoly market will have a ______ price and _____ output than a perfectly competitive market
natural monopoly
Firms such as Con Ed that supply us with public utilities like water, heat, and electricity are examples of ____________
intellectual property
Literary, artistic, musical, and scientific works are all examples of _________
True
True or False? A company that is the only producer of a drug that cures cancer is a monopoly.
true
True or False? The US Postal service is an example of government franchise
protection of intellectual property; government franchise
Two legal barriers to entry when monopolies arise are __________ and __________
economies of scale, legal barriers, network externalities
What are the three barriers to entry when monopolies arise?
government franchise
a government granted right to be the sole seller of a product or service; any other firm that enters the market will be prosecuted
copyright
a grant of exclusive rights to sell a literary, artistic, or musical work that lasts for at least 70 years
monopoly
a market in which only one firm sells a product with no close substitutes; the single firm that sells in that market
greater; ATC; MR=MC
a monopoly earns a profit when P is _______ than _______ where __________
single-price monopoly
a monopoly firm that is limited to charging the same price for each unit of output sold
less; ATC; MR=MC
a monopoly suffers a loss when P is ______ than _______ where _______
natural monopoly
a monopoly that arises when, due to economies of scale, a single firm can produce for the entire market at lower cost per unit than could two or more firms
rent seeking activity
any costly action a firm undertakes to establish or maintain its monopoly status
below
average variable cost curve lies ______ the average total cost curve
below
marginal revenue (MR) curve will always be _____ the demand curve
ownership and control; regulation; prices and profits
in a governement franchise, the monopoly must submit to either government ___________ or government ________ over its ____________
more beneficial
joining a larger network is ___________ than joining a smaller network
market power; willingness to pay; resale
to successfully price discriminate, the firm must satisfy these three conditions: ______, identify _______, and prevent _______
price discrimination
when a firm charges different prices to different customers for reasons other than differences in cost
natural monopoly
when governments think the market is a ________ they grant franchises
ensuring; rise
when governments want to serve the public interest by _____ that there are no competitors that would cause cost per unit to ______ they grant franchises