Chapter 24 Key Concepts

Question 1

Characteristics of monopoly

Answer 1

Single seller, unique product with no close substitutes, price setter, barriers to entry

Question 2

Examples of monoplies

Answer 2

High speed internet, electrical transmission to your house

Question 3

Barriers to entry

Answer 3

Ownership of strategic resources, economies of scale, legal restrictions

Question 4

Monopoly demand curve

Answer 4

The same as market demand since there is a single seller

Question 5

Monopoly marginal revenue curve

Answer 5

Monopoly MR slopes downhill faster than monopoly demand

Question 6

Monopoly graph Profit

Answer 6

ATC is below P at Q*

Question 7

Monopoly graph Breakenven

Answer 7

ATC = P at Q*

Question 8

Monopoly graph loss

Answer 8

ATC above p at Q* but AVC is below P

Question 9

Monopoly graph shutdown

Answer 9

AVC is below P at Q*

Question 10

Price discrimination

Answer 10

When a firm charges two differing prices for the same good

Question 11

Examples of firms that price discriminate

Answer 11

Movies, cell phones, colleges…

Question 12

Monopoly outcomes

Answer 12

Monopoly charges a higher price and produces a lower quantity when compared to perfect condition