HW CHAP 14-15 – Flashcards

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will earn __________ profits, causing the firm to ____________ the industry.

When firms in a perfectly competitive market face the same costs, in the long run they must be operating at their __________ scales.

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency? a. breaking up a natural monopoly into more than one firm b. price discrimination c. antitrust laws d. doing nothing

During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers?

The short-run market supply curve in a perfectly competitive industry shows the _____________________ by all firms at each possible price.

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quantity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium price would be $150. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

In a competitive market with identical firms, ___________________ into the market requires that firms earn zero economic profit in the long run even though they may be able to earn positive economic profit in the short run.

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production.

Which of the following is not a characteristic of a monopoly? a. one buyer b. barriers to entry c. a product without close substitutes d. one seller

For a long while, electricity producers were thought to be a classic example of a ________ monopoly. People held this view because the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region

Which of the following industries is least likely to exhibit the characteristic of free entry? a. satellite radio b. wheat farming c. yoga studios d. selling running apparel

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm. (ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopolist the exclusive right to produce the good.

Which of the following can defeat the profit-maximizing strategy of price discrimination? a. consumer surplus b. market power c. deadweight loss d. arbitrage

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600.

The competitive firm's short-run supply curve is its ______________ curve, but only the portion above the minimum of ________________ cost.

The ________________ is an example of public ownership of a monopoly.

An industry is a natural monopoly when (i) the government assists the firm in maintaining the monopoly. (ii) a single firm owns a key resource. (iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much profit will the airline earn if it sets the price of each ticket at $600?

Which of the following is an example of a barrier to entry? a. Tom charges a higher price than his competitors for his house-painting services. b. Dick obtains a copyright for the new computer game that he invented. c. Harry offers free concerts on Sunday afternoons as a form of advertising. d. Larry charges a lower price than his competitors for his lawn-mowing services.

The George Stigler quote, "...the degree of 'market failure' for the American economy is much smaller than the 'political failure' arising from the imperfections of economic policies ..." illustrates the advantage of which type of public policy toward monopolies?

A monopolist will choose to increase output when at the present level of output, marginal revenue ___________ marginal cost.

Which of the following statements is not correct? a. The government may use antitrust laws to break up an existing company to improve competition. b. Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem. c. Private ownership is typically preferred to public ownership. d. The government may break up a natural monopoly to lower the price charged to customers.

In a market with 1,000 identical firms, the short-run market supply is the sum of the __________________ by each of the 1,000 individual firms at each price.

Which of the following is a characteristic of a natural monopoly? a. Average cost exceeds marginal cost over large regions of output. b. Increasing the number of firms increases each firm's average total cost. c. One firm can supply output at a lower cost than two firms. d. All of the above are correct.

Suppose a firm in each of the two markets listed below were to increase its price by 30 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not? a. movie theaters and ballpoint pens b. restaurants and MP3 players c. cable television and gasoline d. oil and natural gas

Monopolies use their market power to charge a price that is _________ than marginal cost.

Marginal revenue for a monopolist is computed as change in _______________ per one unit increase in quantity _______.

For a monopolist, marginal revenue is ______ than price, whereas marginal revenue is ______ to price for a perfectly competitive firm.

For a monopoly, the socially efficient level of output occurs where...