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Managerial Economics > Monopoly > Flashcards

Monopoly Flashcards

1
Q

LBCPP

Features of a Monopoly

A
  1. Lack of substitutes
  2. Barriers to entry
  3. Competition
  4. Price maker
  5. Profits
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2
Q

Only one firm produces a good without close substitutes.

A

Lack of substitutes

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3
Q

If new firms enter the industry, the monopolist will not have complete control over a firm on the supply.

A

Barriers to entry

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4
Q

Monopolist decides the price of the product.

A

Price Maker

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5
Q

Can maintain supernormal profits even in the long run

A

Profits

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6
Q

SER

Advantages of Monopoly

A
  1. Stability of Prices
  2. Economies of Scale
  3. Research and Development
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7
Q

There is only one firm that sets the market price.

A

Stability of Prices

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8
Q

Big scale productions lower the cost per unit of seller which may be passed on the consumer.

A

Economies of Scale

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9
Q

Customers may be getting a better quality product at a reduced price.

A

Research and Development

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10
Q

HPI

Disadvantages of Monopoly

A
  1. Higher prices
  2. Price discrimination
  3. Inferior goods and services
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11
Q

It leads to exploitation of consumers as they have no option but to buy it from the seller.

A

Higher prices

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12
Q

Monopolists can charge different prices on the same product for different consumers.

A

Price discrimination

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13
Q

Monopolists may produce these as they know the goods will sell.

A

Inferior goods and services

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14
Q

NLGPR

Types of Monopolies

A
  1. Natural
  2. Legal
  3. Government
  4. Patent
  5. Resource
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15
Q

These exist because the firm can provide the commodity at a lower cost per unit than potential entrants.

A

Natural Monopoly

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16
Q

Example of a Natural Monopoly

A

Electric Companies

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17
Q

These exist due to government legislation and protection.

A

Legal Monopoly

18
Q

These are privately-owned companies that are granted a monopoly by the government.

A

Legal Monopoly

19
Q

Example of a Legal Monopoly

A

Water service company

20
Q

It’s a monopoly that’s owned and operated by the government.

A

Government Monopoly

21
Q

What the difference between Legal Monopoly and Government Monopoly?

A

Legal Monopoly = private-owned
Government Monopoly = publicly owned

22
Q

It’s the protection of an invention under patent laws.

A

Patent Monopoly

23
Q

What’s the purpose of a patent monopoly?

A

To encourage research and development by ensuring a period of time over which the potential for monopoly exists.

24
Q

What is the lifespan of a Patent Monopoly?

A

Limited; It’s temporary

25
Q

It’s when a single firm has virtual control over an entire resource’s supply.

A

Resource Monopoly

26
Q

EEPNG

Sources of Monopoly Power

A
  1. Exclusive control over important inputs
  2. Economies of Scales
  3. Patents
  4. Network economics
  5. Government licenses
27
Q

Total Revenue ÷ Quantity

A

Average Revenue

28
Q

It’s represented by the demand in the market.

A

Average Revenue

29
Q

What is the monopolist’s demand curve?

A

Market Demand Curve

30
Q

It’s the revenue earned by selling one more unit.

A

Marginal Revenue

31
Q

In a monopoly, when can a firm sell more?

A

If it lowers prices

32
Q

Why can a monopolist choose the level of output or price but not both?

A

Because monopoly has a negatively sloped demand curve

33
Q

Does the marginal revenue curve has double the slope of the average revenue curve?

A

Yes.

34
Q

It is the tendency of monopoly firms to restrict output to increase prices and earn economic profits.

A

Monopoly underproduction

35
Q

It is measured by the price that customers are willing to pay for an additional output.

A

Marginal Social Benefit

36
Q

It is the result of a monopoly underproduction.

A

Deadweight Loss

37
Q

It is the inefficient allocation of resources.

A

Deadweight Loss

38
Q

It would cause social welfare to decline because mutually beneficial trade activity would fall.

A

Deadweight Loss

39
Q

Monopoly can result in a social loss if monopolist does not what?

A

Does not use cost-effective production methods

40
Q

Under monopoly, marginal cost is what?

A

Less than the price charged at the profit-maximizing level

Managerial Economics (15 decks)

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