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ECON111 > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

What act did the British Parliament authorize to help the East India Company?

A

Tea Act

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2
Q

What was the major industry that nearly monopolized the US in 1860?

A

U.S. cotton industry

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3
Q

What is a natural monopoly?

A

Large economies of scale

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4
Q

Examples of natural monopolies?

A

Water and electric companies

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5
Q

What shape does the demand curve appear for a perfectly competitive firm?

A

Flat

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6
Q

What type of demand curve does a monopolist face?

A

Downward-sloping

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7
Q

What is the shape of total revenue for a monopolist?

A

Hill

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8
Q

What leads to the point where more sales bring in less revenue for a monopolist?

A

Price drop exceeds quantity gain

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9
Q

What is marginal profit?

A

Marginal revenue - Marginal cost

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10
Q

What is the first step a monopolist takes to determine the quantity of output?

A

Set MR = MC

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11
Q

What is the main economic objection to monopolies?

A

Not enough output for efficiency

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12
Q

What did the Southern states want to leverage?

A

Britain’s dependency on its cotton

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13
Q

Why can natural monopolies arise in water and electricity?

A

Economies of scale

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14
Q

What do regulated monopolies ensure?

A

Access to products/services

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15
Q

What does a government do when faced with a natural monopoly?

A

Regulation OR ownership

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16
Q

What is the monopolist seeking to maximize?

A

Profit

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17
Q

What is the profit-maximizing condition for a monopoly?

A

MR = MC

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18
Q

What is total profit?

A

Sum of marginal profits

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19
Q

What indicates that the firm is earning positive profits?

A

Price above average cost

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20
Q

What is a monopoly?

A

Firm controlling all supply of a good/service

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21
Q

What controls a physical resource in a monopoly?

A

Scarce resource

22
Q

When MC > MR, what should the firm do?

A

Reduce output

23
Q

When is total profit maximized?

A

MR = MC

24
Q

When does a monopolist maximize profit?

A

Where MR = MC

25
Q

What did the act do regarding tea?

A

Taxed teas; East India Company monopoly

26
Q

What does monopoly refer to?

A

Single firm producing all output

27
Q

What does a patent grant an inventor?

A

Exclusive legal right

28
Q

What assures allocative efficiency?

A

If P > MC

29
Q

How long do exclusive patent rights last in the U.S.?

A

20 years

30
Q

Is predatory pricing legal in the U.S.?

A

No, it’s a violation of antitrust law

31
Q

What does P > MC indicate?

A

Marginal benefit > Marginal cost

32
Q

What is a trademark?

A

Identifying symbol or name

33
Q

What is the impact of predatory pricing on new entrants?

A

Cannot make money

34
Q

What defines a monopoly in a single market?

A

No close substitutes

35
Q

How does monopoly affect consumers?

A

Higher price, lower quantity

36
Q

Can firms renew trademarks?

A

Yes, if in active use

37
Q

What is the challenge of launching a new national cola drink?

A

High promotional costs

38
Q

What deters competition in a monopoly?

A

Barriers to entry

39
Q

Can barriers to entry lead to monopolies?

A

Yes

40
Q

When does a natural monopoly occur?

A

Quantity demanded < minimum quantity

41
Q

What are economies of scale?

A

Cost advantages with scale

42
Q

What is a copyright?

A

Protection for original works

43
Q

What can a monopoly charge?

A

Any price subject to demand

44
Q

Can barriers to entry limit competition to a few firms?

A

Yes

45
Q

How long does copyright protection last?

A

Life of author + 70 years

46
Q

How is a monopoly often described in practice?

A

One firm with high market share

47
Q

What combines to limit competition in a natural monopoly?

A

Economies of scale and market size

48
Q

Example of a famous trade secret?

A

Coca-Cola formula

49
Q

Which company controls the majority of global diamond production?

A

DeBeers

50
Q

What is a company with control over a physical resource?

A

Natural monopoly

ECON111 (31 decks)

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