Chapter 10 - Monopoly, Cartels, and Price Discrimination Flashcards

1
Q

Differentiate monopoly and monopolist

A

Monopoly: market with a single firm
Monopolist: a firm that’s the only seller in the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a monopolists’ DC?

A

Downward sloping

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Give the equation for total revenue (TR) when monopolists charges the same price

A

TR = p x Q

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Give the equation for average revenue (AR)

A
AR = TR/Q 
AR = (p x Q)/Q = p
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Give the equation for marginal revenue (MR)

A

MR = dTR/dQ

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Since monopolist is not a price taker (compared to perfect competition), what is MR?

A

MR = a -2bQ

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Describe the slope of MR

A

Twice the DC, lying below it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When MR > 0, elasticity is _ 1

A

>

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When MR < 0, elasticity is _ 1

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

When MR = 0, elasticity is _ 1

A

=

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The monopolist’s restriction of output creates a _ for society

A

Deadweight loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Entry barriers allow monopoly profits to persist in the _ run

A

Long

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are economies of scale?

A

When industry demand conditions doesn’t allow more than one firm to cover its costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What causes a natural monopoly?

A

Economies of scale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are two created barriers?

A

Firms already in the market

Government regulations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is creative destruction?

A

The replacement of one monopolist by another through innovation

17
Q

What is a cartel?

A

Organization of producers who act as a single seller to maximize joint profits

18
Q

What are anti-trust policies?

A

Prevent the creation of large cartels would have considerable market power

19
Q

The profit maximizing cartelization of a competitive industry (inc/dec) output and (inc/dec) price from the perfectly competitive level

A

Decreases, increases

20
Q

Why are cartels unstable?

A

Members have an incentive to cheat

21
Q

What is price discrimination?

A

Charging different prices for the same product that have the same cost

22
Q

Any firm facing a _-sloping DC can increase profits if it is able to price discriminate

23
Q

Weekend airline fares that are less than mid-week fares

A

Discriminatory

24
Q

Business-class airline fares that are 3 times as high as economy fare

A

Not discriminatory

25
Different prices charged by movie theatres for adults/seniors/ or students
Discriminatory
26
When is price discrimination possible (3)?
When firms have market power When consumers differ in their valuations When firms can prevent arbitrage
27
(Higher/lower) price in the segment with less elastic demand
Higher
28
(Higher/lower) price in the segment with more elastic demand
Lower
29
Equating MRs in 2 markets will only result in different prices when _ (3)
There are different elasticities of demand Members of different market segment must be identifiable Minimal or no arbitrage
30
What is hurdle pricing?
When firms create an obstacle that consumers must overcome to get a lower price