Chapter 15

Question 1

monopoly

Answer 1

a firm that is the sole seller of a product without close substitutes

Question 2

natural monopoly

Answer 2

a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms

Question 3

output effect

Answer 3

more output is sold, so Q is higher, which tends to increase total revenue

Question 4

price effect

Answer 4

the price falls, so P is lower, which tends to decrease total revenue

Question 5

profit maximization for monopolies

Answer 5

choosing the quantity at which MR = MC, then uses the demand curve to find the price that will induce customers to buy that quantity

Question 6

monopoly profit

Answer 6

( TR/Q - TC/Q) X Q

(P - ATC) X Q

Question 7

deadweight loss in monopolies

Answer 7

not all consumers who value the good at more than its cost buy it..
represented by the area of the triangle between the demand curve and the marginal cost curve

Question 8

price discrimination

Answer 8

the business practice of selling the same good at different prices to different customers

Question 9

perfect price discrimination

Answer 9

describes a situation in which the monopolist knows exactly each customers willingness to pay and can change each customer a different price

Question 10

4 ways gov respond to problems in monopolies

Answer 10

1. try to make monopolized industries more competitive
2. regulating the behavior of the monopolies
3. turning some private monopolies into public enterprises
4. doing nothing at all