Chapter 10: Monopoly, Cartels and Price Discrimination

Question 1

Monopoly

Answer 1

A market containing a single firm

Question 2

Monopolist

Answer 2

A firm that is the only seller in a market

Question 3

A monopolist faces a ____ sloped demand curve

Answer 3

Negatively

Question 4

For a profit-maximising monopolist, price is ____ than marginal cost

Answer 4

Greater

Question 5

Entry barrier

Answer 5

Any barrier to the entry of new firms into an industry, can be natural or created

Question 6

Natural monopoly

Answer 6

An industry characterised by economies of scale sufficiently large that only one firm can cover its costs while producing at its minimum efficient scale

Question 7

Cartel

Answer 7

An organisation of producers who agree to act as a single seller in order to maximise joint profits

Question 8

Price discrimination

Answer 8

The sale by one firm of different units of a product at two or more different prices for reasons not associated with differences in cost

Question 9

Cartels tend to be unstable because ____

Answer 9

There is an incentive for individual firms to violate the output restrictions needed to sustain the joint-profit-maximising price

Question 10

Two problems faced by cartels

Answer 10

• Enforcement of output restrictions

- Restricting entry