5 Written questions
5 Matching questions
- When does a natural monopoly exist?
- A perfectly competive firm that is receiving a price of $5 and has a marginal cost of $6 should always
- In a perfectly competitive market where is equilibrium?
- What is the Optimal Output Rule in a perfectly competitive mkt.?
- WHo had/has a monopoly on diamonds?
- a Whne a large firm can produce a product at a lower per unit cost than can a smaller firm.
- b De Beers
- c Zero economic profits (normal rate of return) this is where MR=MC
- d MR=MC Profit is maximized by producing the quantity for which the marginal cost is equal to the marginal revenue
- e decrease output
5 Multiple choice questions
- Straight up from output to Demand curve. Draw a line to price and you have the profit maximizing price.
- Seperation of buyers into distinct classes (ex: elderly, children, business travelers, non-business travelers
- This is True
- MR curve is always below the demand curve
5 True/False questions
Where on a graph doe sa monoploly set price to maximize profit? → Price minus ATC=profit per unit
At what point is profit maximized in a monopoly? → Price is set in elastic region at the price that the industry believes the customer is willing to pay...NOT where MR=MC which is where price is set in perfect competition.
Why is allocative efficiency not achieved in a monopoly? → Straight up from output to Demand curve. Draw a line to price and you have the profit maximizing price.
In a monopoly what are the barriers to entry? → AR/Average Revenue
Natural monopoly → AN industry inwhich economies of scale are so great that a single firm can produce the product at a lower average totalo cost then would be possible if more then one firm produced the product]