Ch 10 - Monopoly Flashcards
A Monopoly is a firm that…
That has no rivals
A firm that sets or picks a price based on its output decision is called…
A price setter
A firm that acts as a price setter possesses…
Monopoly power
Characteristics of a particular market that block new firms from entering it are called
Barriers to entry
If long run average cost declines as the level of production increases, a firm is said to experience…
Economies of scale.
A firm that confronts economies of scale over the entire range of outputs demanded in its industry is a…
Natural Monopoly
Sellers in markets isolated by distance from their nearest rivals have a a degree of…
Monopoly power
An expenditure that ha already been made and cannot be recovered is called…
A sunk cost
In very few cases the source of monopoly power is he ownership of…
Strategic inputs
An important basis for monopoly power consists of special privileges granted by…
Government agencies
In situations where products become more useful the larger the number of users of the product arises with…
Network effects
When marginal revenue is positive then demand is…
Price elastic
When marginal revenue is negative then demand is…
Price inelastic
When marginal revenue is zero, then demand is…
Unit price elastic
The demand curve for a monopoly is…
The industry demand curve
The marginal revenue curve for a price setter will always
Bisect any horizontal line drawn between the vertical axis and the demand curve
The monopoly firm can sell additional units only by…
Lowering Price
The perfectly competitive firm, by contrast to a Monopoly, can sell ________ at the market price.
any quantity it wants
Demand is price elastic at points in the _____ half of the demand curve and price inelastic in the _____ half of the demand curve.
Upper; Lower
If demand is price ______, a price reduction reduces total revenue because the percentage increase in the quantity demanded is less than the percentage decrease in the price
Inelastic
Marginal revenue is ______ price for the monopoly firm
less than
Additional units of a good should be produced as long as…
the marginal revenue of an additional unit exceeds the marginal cost
The maximizing solution occurs where…
marginal revenue equals marginal cost
