Chp 14 Monopolies

Question 1

One seller of a product, the product doesn’t have close substitutes, and the firm is a price setter

Answer 1

Qualities of a monopoly

Question 2

Which of the following is a barrier to entry in an industry?

a) A single firm owns a key resource that no other firm can access or has a close substitute for

b) The government gives a single firm the exclusive right to produce and sell a good

c) An industry is a ‘natural monoply,’ which occurs when a single firm can supply an entire market with a good/service more efficiently than two or more firms

d) All the above

Answer 2

D) All the above

Question 3

A monopoly’s demand curve (downward sloping) is

Answer 3

The market’s demand curve

Question 4

True or False:

For a monopoly, MR is always lower than P

Answer 4

True

Question 5

Level of output that maximizes profita for a monopoly

Answer 5

MR = MC < P

Question 6

Level of output that maximizes profita for a monopoly

Answer 6

MR = MC < P

Question 7

Monopoly price

Answer 7

Occurs where the quantity of MC = MR meets the demand curve

Question 8

Monopolist profit

Answer 8

TR - TC

Question 9

Monopolists produce (more/less) than the socially efficient quantity of output and charges a (higher/lower) price

Answer 9

Less; Higher

Question 10

True or False:

The key things needed to find Deadweight Loss is the point where MC = MR meet, where MC = D, and price where the quantity produced at MC = MR meets demand curve

Answer 10

True

Question 11

Deadweight loss equation

Answer 11

1/2 x (difference between A and B) x (difference between C and B)

Question 12

Producer surplus equation

Answer 12

Area of □A + area of □B

Question 13

Competition Law

Answer 13

legislation to prevent mergers that would make the marlet less competitive

Question 14

Regulation

Answer 14

When government agencies regulate the prices a monopoly can charge, usually set P = MC

Question 15

Public ownership

Answer 15

When the government can run the monopoly itself, typically aren’t as efficient

Question 16

If the inefficiency of a monopoly is small by society’s standard, governments will often?

Answer 16

Do nothing

Question 17

The business practice of selling the same good at different prices to different customers, even though production costs stay the same regardless

Answer 17

Price discrimination

Question 18

True or False:

Price discrimination can’t exist in a perfectly competitive market

Answer 18

True, there are too many sellers that are selling at market price

Question 19

Price discrimination is achieved when the firm has?

Answer 19

Market power and the ability to segregate the market, according to consumer’s willingness to pay

Question 20

Perfect price (first degree) discrimination

Answer 20

When a monopolist charges each individual a different price based off their exact willingness to pay

Question 21

A monopolist’s producer surplus is?

Answer 21

The area under the demand curve, above the marginal cost curve

Question 22

True or False:

Under Perfect Price discrimination, there is no deadweight loss

Answer 22

True

Question 23

Multi-part/block pricing (second degree) discrimination

Answer 23

Charging a different price based on the quantity of product sold

Question 24

Ordinary (Third Degree) Price Discrimination

Answer 24

Charging different prices for goods in different markets

Question 25

Ordinary (Third Degree) Price Discrimination

Answer 25

Charging different prices for goods in different markets