econ after 3rd quiz

Question 0

Where does a monopoly operate at for maximum profit?

Answer 0

MC = MR

Question 1

What is a monopoly?

Answer 1

A firm that is the exclusive seller of a product with which there are no close substitutes

Question 2

How to find the price that a monopoly charges?

Answer 2

Determine the profit maximizing quantity (MC = MR) and then go to the demand curve at that quanity

Question 3

Why is a monopolies demand curve NOT equal to the MR?

Answer 3

The downward sloping quality of the of its demand curve causes the monopoly to lower its prices to increase the quantity resulting in less revenue per extra unit of output

Question 4

For a monopoly, how can you calculate the slope of a MR curve? (If demand is a line)

Answer 4

it’s 2x as steep

Question 5

For a monopolistic firm not engaged in price discrimination, how do the demand & AR curve relate?

Answer 5

They are the same

Question 6

2 ways to calculate monopoly profits

Answer 6

1. Multiply the difference between price and AC by quantity

2. TR - TC

Question 7

When does producer surplus exist?

Answer 7

When the price goods are sold for is greater than what it costs the firms to manufacture those goods

Question 8

When does CS exist?

Answer 8

When the price paid by a customer is less than what the consumer would be willing to purchase the good for

Question 9

when is a monopoly good (cost-reducing)?

Answer 9

When a monopolies costs are lower than a competitive firms would be - they are bigger so there can be a large scale reduction in cost

Question 10

When does a natural monopoly occur?

Answer 10

When it would be more costly for two or more firms to operate than one
Eg uilities market - water electricity gas bc of high fixed cost associated with entry onto these markets