Monopoly Flashcards
Unlike other firms, a monopolist’s demand curve is _____________________ market demand curve.
Unlike other firms, a monopolist’s demand curve is the same as the market demand curve.
A monopoly is characterized by all of the following except:
- there are no close substitutes to the firm’s product.
- there are only a few sellers each selling a unique product.
- the firm has market power.
- entry barriers are high.
there are only a few sellers each selling a unique product.
A monopolist faces a_______________ demand curve.
downward-sloping
A public franchise is a government designation that a private firm is the only ____________________.
legal producer of a good or service
Governments grant patents to compensate firms for _____________costs.
research and development
The De Beers Company, one of the longest-lived monopolies, is facing increasing competition. One source of competition comes from people who might resell their previously owned diamonds. Why is De Beers worried that people might resell their previously owned diamonds? because previously owned diamonds would be a_______________ to newly mined diamonds and therefore reduce De Beers’ market power
close substitute
A natural monopoly is most likely to occur in an industry where ____________ are very large relative to _____________..
where fixed costs are very large relative to variable costs
If a monopolist’s marginal revenue is $25 a unit and its marginal cost is $25, then to maximize profit the firm should ________________
continue to produce the output it is producing.
A price maker is a firm that has________________.
some control over the price of the product it sells.
Figure 15-6 shows the cost and demand curves for a monopolist. The monopolist earns a profit of
$248.
Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The profit-maximizing output and price for the monopolist are
output = 62; price = $24.
To maximize profit a monopolist will produce where
marginal revenue is equal to marginal cost.
Economic efficiency in a free market occurs when the sum of consumer surplus and producer surplus is _________.
maximized.
Compared to ____________________, the consumer surplus in a monopoly is lower because price is higher and output is lower.
perfect competition
Market power refers to
the ability of a firm to charge a price higher than the marginal cost of production.
The size of a deadweight loss in a market is reduced by market price being close to _____________
marginal cost.
Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Under perfectly competitive conditions, economic surplus is maximized. Under monopoly conditions economic surplus is less than under perfect competition and there is a ________________.
deadweight loss.
The most profitable price for a monopolist is the price for which marginal revenue equals ______________
marginal cost.
The first important federal law passed to regulate monopolies in the United States was the
Sherman Act.
In the United States, government policies with respect to monopolies and collusion are embodied in _______________.
antitrust laws.
A vertical merger is
A merger between firms at different stages of production of a good
