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Death (AP Micro) > Monopoly Quiz review (A32-A39) > Flashcards

Monopoly Quiz review (A32-A39) Flashcards

1
Q

Equation to find TR (Total Revenue)

A

P x Q (price x quantity); OR Current TR - Previous TR

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2
Q

Equation for MR (Marginal Revenue)

A

Change in TR/Change in Quantity

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3
Q

Firms will only produce…

A

in the elastic portion of the demand curve where marginal revenue is positive

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4
Q

Why does MR fall faster than DARP in imperfect competition?

A

because they must reduce prices for all sales in order to increase the quantity sold

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5
Q

What is P in relation to MC in imperfect competition? (greater than, less than, equal to?)

A

P > MC (so imperfect competition is allocatively inefficient)

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6
Q

What is P in relation to MR in imperfect competition? (greater than, less than, equal to?)

A

P > MR

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7
Q

Marginal revenue (MR) is positive where the demand curve is…

A

elastic. (Left half of curve).

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8
Q

Where do you draw the MR curve on the X axis (in a monopoly graph?)

A

From the demand curve to the midpoint of the x axis

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9
Q

Monopolies will never operate on the _____ portion of the demand curve

A

inelastic (it always HAS to be elastic…like a rubber band or something)

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10
Q

If the curve is inelastic, how does a monopoly get the curve to become elastic?

A

They will keep reducing output. This is where MR is positive (MR > 0)

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11
Q

Total Revenue is at its maximum where…

A

MR = 0

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12
Q

In the short run, the shapes of the ATC and MC result from…

A

diminishing marginal productivity of their resources

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13
Q

In the long run, the shape of the ATC results from…

A

economies and diseconomies of scale

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14
Q

Equation to find Average Revenue (AR) =

A

Total Revenue / Quantity

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15
Q

The most profitable output (quantity) is where…

A

MC = MR. (think: Where MR = MC, produces most profit see…) This is the same for monopolies AND regular producers

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16
Q

Monopolists will charge the demand curve price at…

A

the quantity above where MC = MR (think: see price above at demand, quantity right down again)

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17
Q

How to calculate economic profit or loss for one unit

A

P - ATC`

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18
Q

How to calculate TOTAL economic profit or loss

A

(P - ATC) x Quantity

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19
Q

Why are monopolies allocatively inefficient?

A

They are producing less and charging more than MC (they also charge more than MR)

20
Q

Where do you shade a profit or a loss?

A

Shade the rectangle between price and ATC

21
Q

Where do you shade total costs?

A

Shade the rectangle in between ATC and the X axis

22
Q

Where do you shade fixed costs?

A

Shade the rectangle between ATC and AVC

23
Q

Where do you shade Consumer Surplus (for imperfect comp.)?

A

Area between price and demand curve (consumer surplus should be lower for imperfect comp.)

24
Q

Where do you shade Producer Surplus (for imperfect comp.)?

A

Area between price and supply curve (should be greater for imperfect comp)

25
Q

Where do you shade Deadweight Loss?

A

Triangle formed by the supply curve, demand curve, and the quantity

26
Q

Deadweight loss occurs where P is in what relation to MC?

A

When P > MC

27
Q

What are the distinguishing characteristics of a Monopoly? (hint: there are 6)

A

Single producer; No close substitutes; Barriers to entry; Economies of Scale; Control of Key Resources; Market Power

28
Q

Single producer

A

only one supplier in the industry

29
Q

No close substitutes

A

Consumers cannot find similar products in other markets

30
Q

Barriers to entry

A

Something prevents rival firms from entering the market. This reduces competition and makes long-term economic profits or losses possible.

31
Q

Legal Barriers

A

government gives a single firm the exclusive right to produce a good. (ex: public franchise, patents, trademarks, copyrights, etc.)

32
Q

Economies of Scale

A

A natural monopoly exists where ATC continually declines at least to the quantity demanded by the market. Allows at most one firm to exist in the market.

33
Q

Control of Key Resources

A

Least important factor, but if a firm controlled most of the available resources, then it’s difficult for competitors to enter the market

34
Q

A monopolist is a price ______-

A

seeker. It controls the output to maintain the price it wants.

35
Q

To find the portion of consumer surplus that is transferred to the imperfect competitor…

A

area of transferred surplus / total consumer surplus in perfect comp.

36
Q

The monopolist’s demand curve is…

A

downward sloping, and price is higher than marginal cost and marginal revenue

37
Q

Monopolies are…

A

productively inefficient AND allocatively inefficient

38
Q

Refer to page 19 in the study guide packet for some cool graphs

A

Did ya do it? It also has steps for graphing a monopoly!

39
Q

Price discrimination (definition)

A

is selling the same good at different prices to different consumers

40
Q

What are the 3 conditions of price discrimination?

A
  1. Identify and separate groups of consumers by their willingness to pay 2. Cannot be resold 3. Inelastic demand
41
Q

Positives of Price Discrimination

A

raises economic welfare by producing a greater quantity (same amount as perf. comp); Allocatively efficient

42
Q

Negatives of Price Discrimination

A

consumer surplus decreases as profits increase (maybe even zero consumer surplus

43
Q

Unregulated monopolies

A

where Price is above MC = MR

44
Q

Fair Return Price (price = ATC)

A

output is higher and price is lower than unregulated; firm is not operating @ its most efficient output; no gov’ subsidy

45
Q

Socially optimal price (price = MC)

A

allocatively efficient (equilibrium); gov’ must subsidize if the price is below ATC

46
Q

Price regulation is positive from a social point of view because:

A

it reduces price, increases output, and reduces the economic profits of monopolies

47
Q

Look on page 22 of study guide for a graph of the different types of monopolies!

A

srsly go look

Death (AP Micro) (2 decks)

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