Chapter 14

A market structure in which many firms sell differentiated products is called ____________________; there are few barriers to entry.

Monopolistic Competition

A(n) ____________________ is a market structure in which one firm makes up the entire market.

Monopoly

Why are patents important to those who hold them? - Patents act as a barrier to entry, allowing monopoly profits. - Without patents, there will no longer be economies of scale in production. - Without patents, there would be considerably more price discrimination in the market. - Patents actually do not matter because they do not guarantee that a firm will make a profit.

Patents act as a barrier to entry, allowing monopoly profits.

A monopoly firm is different from a competitive firm in that: a monopolist's demand curve is perfectly inelastic whereas a competitive firm's demand curve is perfectly elastic. a monopolist can influence market price whereas a competitive firm cannot. a competitive firm has a U-shaped average cost curve whereas a monopolist does not. there are many substitutes for a monopolist's product whereas there are no substitutes for a competitive firm's product.

a monopolist can influence market price whereas a competitive firm cannot.

The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for: - a competitive firm is inelastic. - a monopolist is the market demand curve. - a competitive firm lies above its marginal revenue curve. - a monopolist lies below its marginal revenue curve.

a monopolist is the market demand curve.

Under monopolistic competition, a long-run equilibrium exists when price equals: - marginal revenue. - average total cost. - marginal cost. - minimum average total cost.

average total cost.

A monopolist: - earns a profit in the short run but not in the long run. - can earn profits or incur losses in the short run. - earns a profit in the short run and the long run. - can never incur losses.

can earn profits or incur losses in the short run.

When a monopolistically competitive industry is in long-run equilibrium: - price equals minimum average total cost. - price equals marginal cost. - firms earn economic profits. - firms earn zero economic profits.

firms earn zero economic profits.

If there were no barriers to entry: - firms would compete away monopoly profits. - "just" monopolies would still exist. - patents could still be offered by the government. - natural monopolies would still exist.

firms would compete away monopoly profits.

A natural monopoly: is usually allowed to choose its price so as to maximize profits in the United States. has an average total cost curve that reaches minimum possible average total cost at a low level of output. is usually subject to antitrust suits. occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market.

occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market.

To ____________________ is to charge different prices to different individuals or groups of individuals.

price discriminate

As firms leave a monopolistically competitive industry that is sustaining economic losses: - total quantity demanded increases for the industry. - the demand curves facing the remaining firms in the industry shift to the right. - the demand curves facing the remaining firms in the industry shift to the left. - the market supply curve shifts to the right.

the demand curves facing the remaining firms in the industry shift to the right.

Marginal revenue is not equal to price for a monopolist because: - the monopolist sets price equal to marginal cost. - the monopolist's demand curve is below its marginal revenue curve. - total revenue increases as output increases. - the monopolist must lower the price of all units in order to sell more.

the monopolist must lower the price of all units in order to sell more.

If a firm has a monopoly over the sale of photographic paper and seeks to maximize profits, it: will set the price of the product so that its marginal revenue equals its marginal cost. will set the price of the product equal to the average total cost of production. adjusts the price of the product until demand becomes perfectly inelastic. will set the price of the product equal to the marginal cost of production.

will set the price of the product so that its marginal revenue equals its marginal cost