52 terms

Microeconomics Ch 15

Monopoly - Quiz Questions

Terms in this set (...)

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