Chapter 10 Flashcards
A monopoly exists when a single firm is the sole producer of a product for which there are no close ______.
Substitutes
True or false: Pepsi could be regarded as a monopolist depending on how we define the product.
True
True or false: Pepsi could be regarded as a monopolist depending on how we define the product.
True
In a very small remote town, there is only one grocery store which is considered to be a monopoly. For this to be true, what needs to be clearly defined?
The market
Which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes?
Monopoly
Monopolies come into existence because of:
Barriers to entry
What kind of barrier to entry exists when a company is the sole owner of a particular technology?
a technical barrier
The DeBeers Diamond Company, which owns or runs the majority of the world’s diamond mines, has market power over the diamond trade. How was this market power obtained?
Control over a scarce resource.
True or false: Only very large companies can be monopolies.
False
What kind of barrier to entry exists when a company has a patent or copyright on their product?
A legal barrier
Which of the following is a good example of a monopoly?
a public utility
Extensive economies of scale tend to block the entry of new firms into an industry by reducing ______ which are difficult to match.
unit costs
What kind of barrier to entry exists when a company is the sole owner of a resource?
a technical barrier
Which of the following is a technical barrier to entry?
An aluminum company controls most of the world’s bauxite mines (a key input).
Computer operating software, commercial aircraft, and automobile manufacturing are examples of industries in which ______ limit the entry of new firms.
Economies of scale
______ create(s) legal barriers to entry.
Government
Which of the following are barriers to entry?
Control over a scarce resource.
Patents and copyrights.
Which of the following are legal barriers to entry?
Patents
License
Which of the following are reasons why a monopolist is considered a price maker?
The monopolist exerts control over the price.
The monopolist controls the total quantity supplied.
Economies of scale act as a barrier to the entry of new firms into an industry because ____.
they imply very extensive start-up costs which keeps out competition
If a monopolist determines the price then the market will decide the _____ and if the monopolist decide the quantity then the market will decide the _____.
quantity; price
What kind of barrier to entry exists when a company is the sole owner of a particular technology?
a technical barrier
In a monopoly, the demand curve for the firm is also the demand curve for the
Industry or market
Which of the following are examples of industries in which economies of scale block the entry of new firms?
Commercial aircraft
Gas & Electric Utilities
Steel