Chapter 11 - Pure Monopoly

Flashcards covering key concepts from the lecture on pure monopoly and its characteristics.

Pure Monopoly

A market structure where a single firm is the sole producer of a product, without any close substitutes.

Cross Elasticity of Demand

A measure of the responsiveness of the quantity demanded of one good to a change in the price of another good.

Downward Sloping Demand Curve

A characteristic of monopolistic markets where higher prices result in lower quantities demanded.

Price Elasticity of Demand

A measure that indicates how much the quantity demanded of a good responds to a change in price.

Marginal Revenue (MR)

The additional revenue generated from the sale of one more unit of a product.

Allocative Efficiency

A state of the economy in which production represents consumer preferences, achieving the most efficient allocation of resources.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs.

Total Revenue (TR)

The total receipts from sales of a given quantity of goods or services, calculated as price per unit times the quantity sold.

X-Inefficiency

A situation in which a firm does not minimize its costs, resulting in higher average costs due to lack of competitive pressure.

Price Discrimination

The strategy of selling the same product to different consumers at different prices to maximize revenue.

Perfectly Elastic Demand

A situation in which the demand curve is horizontal, indicating that consumers will only buy at one price and no more.

Which of the following could explain why a firm is a monopoly? Select one or more answers from the choices shown

Answer: Patents, Economics of scale, and Government licenses.

2. The MR curve of perfectly competitive firm is horizontal. The MR curve of monopoly firm is:

Answer: Downward sloping.

4. How often do perfectly competitive firms engage in price discrimination?

Answer: Never.

Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. To maximize profit, the monopolist should charge a higher price to the group that has

Answer: the lower elasticity of demand.