Chapter 10: Monopoly Flashcards
(33 cards)
Market Power
Ones ability to alter the market price of a good or service
Monopoly
To control the entire market supply of a good or service
Profit-Maximization Rule
A firms rate-of-output should be where marginal revenue equals marginal cost
Marginal Revenue (MR)
A change in total revenue based on a one-unit increase in quantity sold
Barriers to Entry
Factors making entering into a market very difficult
Economies of Scale
A reduction in minimum average costs, when scale of production increase
Production Decision
Deciding weather a firm should produce a product considering existing plants and equipment.
Average Total Cost (ATC) Formula
Total Cost / Quantity Produced
Marginal Cost Pricing
Supply of goods = Marginal Cost
Price Elasticity of Demand Formula
% change in quantity / % change in price
Price Discrimination
A good is priced differently to various consumers
Consumer Surplus
Max price willing to pay - price paid
Natural Monopoly
A firm able to achieve economies of scale over the entire market supply
Contestable Market
A industry that can be entered if prices of profits increase
Antitrust
Government Intervention in order to prevent abuse of market power
How do you find profit Maximization on a graph?
where MC and MR cross
MR will always be _________ than its price when the DC is downward sloping?
Less
What do competitive industrys pursue?
Cost reductions, and product improvements
Mix of Output
Informs of true opportunity costs
What affects output, employment, and resource allocation?
Changes in prices and product factors
Inelastic Demand =
Increased Profits
Greater price elasticity of demand =
Difficulty raising up prices and production volume
What kind of elasticity occurs when businesses request demand?
Inelastic
What kind of elasticity occurs when nonbusiness demand is requested?
Elastic
