Microeconomics Ch 15 – Flashcards
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The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?
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Marginal cost and marginal revenue
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When a single firm can supply a product to an entire market at a smaller cost than could two or more firms, the industry is called a
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natural monopoly.
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When a monopoly increases its output and sales,
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the output effect works to increase total revenue and the price effect works to decrease total revenue.
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The economic inefficiency of a monopolist can be measured by the
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deadweight loss.
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The marginal revenue of a monopolist falls below price because the firm:
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Confronts a downward-sloping demand curve.
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A monopolist will charge a price that:
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exceeds the marginal cost.
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Monopoly is a market structure where
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there is a single seller producing a unique product.
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Monopoly is the market structure in which
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one firm makes up the entire market.
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Average revenue for a monopolist is equal to
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the price the monopolist sets.
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The demand curve for a monopolist is
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the same as the market demand curve.
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A monopoly firm is different from a competitive firm in that
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the monopolist is a price-Maker, whereas the competitive firm is a price-Taker
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The price a monopolist charges for its product is
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above marginal revenue
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The monopolist's marginal revenue is less than price because
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the monopolist must lower the price of all units in order to sell an additional unit.
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If Marginal Revenue is greater than Marginal Cost, the monopolist should
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decrease production.
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The welfare loss triangle shows
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the welfare costs of monopoly in terms of consumer and producer surplus.
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Compared to a perfectly competitive firm, a monopolist
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charges a higher price.
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The social cost of monopoly refers to the fact that
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there is a loss in consumer surplus and producer surplus when a monopolist raises price and restricts output.
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Natural monopoly exists when one firm can supply the output demanded at
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lower cost than two or more firms.
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For a natural monopoly
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per unit costs are always falling.
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A natural monopoly occurs when a single firm can supply the entire market demand for a product
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at a lower average total cost than would be possible if two or more firms supplied the market.
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Price discrimination occurs when
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consumers are divided into two groups with one group paying a high price and the other paying a low price.
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A monopolist engages in price discrimination to
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earn more profit than would be possible if every buyer paid the same price.
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As compared to a normal monopolist, a price-discriminating monopolist produces a
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larger output and charges each consumer a different price.
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A price-discriminating monopolist
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is able to capture some of the consumers' surplus.
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Charging different prices to different customers for reasons other than cost
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Price discrimination
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The ability to alter the market price of a good or service
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Market power
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A market controlled by only one seller
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Monopoly
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A monopoly may persist because of cost advantages over smaller firms if economies of scale exist
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Natural Monopoly
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Obstacles that make it difficult or impossible for would-be producers to enter a particular market
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Barrier to entry
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Which of the following is true for a monopolist?
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It faces a downward-sloping demand curve; It must lower its price on all of its units in order to sell any additional units; Its marginal revenue curve is below its demand curve.
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Market power is
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The ability to alter the market price of a product.
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The marginal revenue curve is below the demand curve:
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If a firm must lower its price to sell additional output.
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A barrier to entry is
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An obstacle that makes it difficult for new firms to enter a market.
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If the firms in a competitive market become plants owned by a monopoly, then the monopoly would
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Move upward along the market demand curve as it raises price.
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Both a competitive firm and a monopoly
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Face downward-sloping market demand curves.
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Monopolists set prices
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At the output where marginal revenue equals marginal cost.
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Compared with a competitive market with the same cost and market-demand circumstances, monopoly results in
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Higher prices and lower output.
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If a firm has market power, the marginal revenue curve always lies below the demand curve.
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True.
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Since the monopolist's marginal revenue is below its price, its equilibrium output is the same as a perfectly competitive firm's.
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False.
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Since a monopolist is a price taker, it cannot have a supply curve.
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False.
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After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold, because of
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a downward sloping demand curve.
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A monopolist's marginal revenue is less than price because
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the monopolist must lower the price of all units in order to sell an additional unit.
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Suppose a monopoly is producing at the profit-maximizing level of output. At that level of output
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Marginal Revenue = Marginal Cost
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The price a monopolist charges for its product is
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above marginal revenue.
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The supply curve of a monopolist is
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nonexistent; a monopolist simply chooses the profit-maximizing point on the market demand curve.
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A monopoly's short-run supply curve is its marginal cost curve above minimum average variable cost.
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False.
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A monopolist should decrease production if
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Marginal Revenue < Marginal Cost; MR < MC
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Generally speaking, the profit-maximizing output for a monopolist occurs where marginal revenue equals zero.
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False.
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