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ECON Final > Monopoly > Flashcards

Monopoly Flashcards

1
Q

A single seller/firm in a market ?

A

Monopoly

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2
Q

Monopoly has ___________ to prevent other firms from entering a market and competing?

A

Barriers to Entry

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3
Q

What makes monopoly illegal and subject to regulation and prosecution from congress of the president ?

A

Sherman and Clayton Anti trust acts (1890’s)

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4
Q

What are the three legitimate sources of Monopoly?

A
  • Sole Ownership of the Input
  • Government Action/Regulation
  • Natural Monopoly
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5
Q

If a single firm controls all of an input needed to produce a good then they will be a monopoly

A

Sole Ownership of Input

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6
Q

Legal right to a monopoly for a certain period of time?

A

Gov’t Action/Regulation

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7
Q

Occurs when the demand curve line in a market intersects the Average total cost curve and long run average cost curve in economies of scale ?

A

Natural Monopoly

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8
Q
  • 3% on deposits
  • 6% on loans
  • golf by 3 oclock
A

3-6-3 Days of Banking

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9
Q

Permitting a natural monopoly to exist but using a price ceiling to regulate them ?

A

Remedy

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10
Q

Agreement amongst firms to collectively behave as a monopolist ?

A

Collusion

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11
Q

Merging with competitors for purposes of not competing with them ?

A

Illegitimate monopoly sources

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12
Q

Demand function expressed Quantity Demanded as a function of Price

A

Inverse Demand and Monopolists Revenue Function

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13
Q

Inverse Demand Function (D -1) expresses given linear demand through what formula ?

A

Qd = a - bP or

bP +Qd = a

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14
Q

Formula for Inverse Demand function Price is ?

A

D -1 : P= (a - Qd/ b)

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15
Q

In a competitive market price is Pe - price the firm receives does not depend on ?

A

Choice of (q)

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16
Q

A monopolist is a __________ not a price taker ?

A

Price Setter

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17
Q

Monopolists Price formula is ?

A

P(q) = (a/b) - (1/b) x(q)

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18
Q

Monopolists Revenue Function is ?

A

R(q) = P(q) x (q)

19
Q

The relative change in the firms revenue at (q) units if the firm were to produce and sell a small additional amount of the goods?

A

Marginal Revenue at (q) units

20
Q

Marginal Revenue function where (q) changes?

A

MR (q) = R(q+change(q)) - R(q) / change (q)

21
Q

The objective of any firm is to choose (q) to ?

A

Maximize Profits

22
Q

Relative change in profit that the firm would receive from producing and selling a small additional amount of (q)?

A

Marginal Profit (maximized at q units)

23
Q

At (q=q^) if Marginal Revenue is GREATER that Marginal Cost then ?

A

Maximized Profit of (q^) is GREATER than 0 and profit will INCREASE

24
Q

At (q=q^) if Marginal Revenue is LESS that Marginal Cost then ?

A

Maximized Profit of (q^) is LESS than 0 and profit will Decrease

25
Q

At (q=q^) if Marginal Revenue is EQUAL to Marginal Cost then ?

A

Maximized Profit of (q^) EQUALS 0 and profit wont change

26
Q

Given our assumptions about firms production a quantity known as (q*) will exist such that ?

A

MR(q) > MC(q) in all quantities less than (q*)

27
Q

Profit Maximization increasing in quantity means ?

A

MR(q) = MC(q) at quantity equalling (q*)

28
Q

Profit Maximization is constant in quantity which means ?

A

MR(q) > MC(q) at quantity less than (q*)

29
Q

Profit Maximization is decreasing in quantity which means ?

A

MR(q) < MC(q) at quantity more than (q*)

30
Q

Any profit maximizing firm will choose to produce and sell the amount of the good where marginal revenue equals marginal cost

A

Rational actors make decisions at the margin (using marginal analyses)

31
Q

In a competitive market the price the firm receives is Pe and does not depend on?

A

The firms Choice of (q)

R(q) = Pe X (q) MR(q) = Pe

32
Q

(q*) for a firm in a competitive market is the quantity where their Marginal Cost equals ?

A

The Market Price

33
Q

Social Welfare that could be generated but isn’t is ?

A

Deadweight Loss

34
Q

At (q*) how do you find the marginal Revenue ?

A

MR(q*) = (a/b) - (2/b) X(q)

35
Q

At (q) how do you use Marginal revenue to find the (q)?

A

Set Marginal Revenue equal to Marginal Cost

MR(q) = MC(q) gives you (q*)

36
Q

At (q*) how do you find the monopolist price ?

A

Set the Quantity Demanded function to Price and plug in the (q*)

37
Q

At (q*) how do you find the Revenue ?

A

Multiply the Monopolist Price by the (q*)

(MP)X(q*) = Revenue

38
Q

At (q*) how do you find the Total Cost ?

A

Plug the (q*) into the Total Cost function

39
Q

At (q*) how do you find the Profit Maximization?

A 
Plug the (q*) into the Profit Max function 
Profit Max (q*) = R(q*) - TC(q*)
40
Q

Learner Index formula

A

(P - MC) / MC

41
Q

Charging different consumers different prices for the same good in a way that is not related to the cost of serving different customers but rather on willingness to pay?

A

1st Degree Price Discrimination

42
Q

The per unit price a consumer pays is based on total amount bought, quantity discounts?

A

2nd Degree Price Discrimination

43
Q

1st Degree Price Discrimination examples and 2nd Degree Price Discrimination examples are?

A

1st - Financial Aid, Senior/Child Discounts on tickets

2nd - Buying a single drink compared to a 6 pack

ECON Final (3 decks)

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