Econ Ch. 15 – Flashcards

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The fundamental source of monopoly power is
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Barriers to entry
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Which of the following is an example of a barrier to entry?
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John obtained a copyright for the song he wrote and recorded.
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Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm
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must lie entirely below the average total cost curve.
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A monopoly firm is a price
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maker and has no supply curve
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Monopolies use their market power to
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charge a price that is higher than marginal cost.
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In a market characterized by monopoly, the market demand curve is
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downward sloping
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A monopolist's average revenue is always
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equal to the price of its product.
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What is the shape of the monopolist's marginal revenue curve?
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a downward-sloping line that lies below the demand curve
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The deadweight loss associated with a monopoly occurs because the monopolist
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produces an output level less than the socially optimal level.
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When a monopolist is able to sell its product at different prices, it is engaging in
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price discrimination.
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Price discrimination requires the firm to
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separate customers according to their willingnesses to pay.
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A monopolist's profits with price discrimination will be
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higher than if the firm charged just one price because the firm will capture more consumer surplus.
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When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to
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price discriminate
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If a monopolist can practice perfect price discrimination, the monopolist will
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eliminate consumer surplus eliminate deadweight loss maximize profits
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If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will
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earn negative profits, causing the firm to exit the industry.
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If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will
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earn zero profits
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For a typical natural monopoly, average total cost is
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falling, and marginal cost is below average total cost.
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