Econ Final

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

A monopolist

Once a cartel is formed, the market is in effect served by

A monopoly

Natural Monopolies

A single firm can supply a good at a lower cost than two or more firms

Collusion

An agreement among firms in a market about quantities to produce or prices to charge.

Profits

Q*(P-ATC)

Second degree price discrimination

Quantity discount ($1.50 each or 10 for $10)

Free entry and exit

Same as perfect competition

Price Discrimination

Selling the same good at different prices to different customers

In the prisoners' dilemma game, self-interest leads

each prisoner to confess. to a breakdown of any agreement that the prisoners might have made before being questioned. to an outcome that is not particularly good for either prisoner.

Monopoly Resources

A firm is the sole owner of key resource

Cartel

A group of firms that agree to collude

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.

$13,000

When an oligopoly market reaches a Nash equilibrium,

A firm will have chosen its best strategy, given the strategies chosen by other firms in the market.

The fundamental source of monopoly power is

Barriers to entry

Business-stealing externality

Businesses are worse off bc smaller market share

Marginal revenue for a monopolist is computed as

Change in total revenue per one unit increase in quantity sold.

An agreement among firms in a market about quantities to produce or prices to charge is called

Collusion

Many sellers

Competing for the same group of customers

Splitting up a monopoly is often justified on the grounds that

Competition is inherently efficient.

Product-variety externality

Consumers are better off bc larger variety of products

In an oligopoly, each firm knows that its profits

Depend on both how much output it produces and how much output its rival firms produce.

Third degree price discrimination

Different prices to different groups (airplane tickets or movie tickets)

Monopoly firms have

Downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

Perfect price discrimination

Eliminates deadweight loss

First degree price discrimination

Every consumer is charged their max willingness to pay

A monopolist is able to choose whatever price that it wishes and is only constrained by its greed.

False

A monopolist produces where P > MC = MR.

False

Long run

Firms can enter or exit the market, firms can earn zero economic profit in the long run

Government created monopolies

Government assign the exclusive right to sell a good/service

In general, game theory is the study of

How people behave in strategic situations.

A downward-sloping demand curve

Is a feature of all monopolistically competitive firms.

A dominant strategy is one that

Is best for the player, regardless of what strategies other players follow.

​Which of the following is true about a monopolistically competitive firm?

It can earn an economic profit in the short run, but not the long run.

In order to sell more of its product, a monopolist must

Lower its price

Oligopoly

Market structure in which only a few sellers offer similar products

Which of the following is not a difference between monopolies and perfectly competitive markets?

Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

Which of the following is an example of a monopolistically competitive industry?

Movies

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

Not in the best interest of society, one that fails to maximize total economic well-being, inefficient.

Short run

Operate like a monopolist, can earn negative or positive economic profit

A firm cannot price discriminate if it

Operates in a competitive market

Loss of welfare for reasons similar to monopolies

Output is lower than socially optimal, Prices are higher

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

P>MC

Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is

Perfectly Elastic

Imperfectly competitive firms are characterized by

Price making ability

Product differentiation

Products are at least slightly different, have downward sloping demand curve

Which of the following is not correct?

Public ownership is the most common public policy toward monopolies in the United States.

If government officials break up a natural monopoly into four smaller firms, then

The average cost of production will increase

Monopoly

The sole seller of a product without close substitutes

Game theory

The study of how people behave in strategic situations

Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with a larger number of firms.

True

In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage.

True

In the case of oligopolistic markets, self-interest makes cooperation difficult and it often leads to an undesirable outcome for the firms that are involved.

True

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

True

The product-variety externality states the benefits to consumers from the introduction of a new product.

True

The socially efficient quantity is found where the demand curve intersects the marginal cost curve.

True

The three main sources of barriers to entry are monopoly resources, government regulation, and the firm's production process.

True

Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?

because the company would sell so few diamonds that it would earn higher profits by selling at a lower price

Which of the following markets impose deadweight losses on society? perfect competition monopolistic competition monopoly

perfect competition monopolistic competition

​In which of the following market structures can a firm earn an economic profit in the short run?

​Perfect competition Monopolistic competition Monopoly