U8-Monopoly Barron's

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29 Terms

1

a monopoly is when

a single firm controls the entire industry and there are no close substitutes

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2

the demand and MR curve for a monopoly are

downward sloping

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3

the MR curve for a monopoly is

below the demand curve

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4

the MR curve is below the demand curve because

the monopoly is a price maker and if it produces more, the price of the product decreases

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5

government can create monopoly by

making one firm the only producer or through copyright and patents

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6

resources can create monopolies when

one firm that produces also controls all resources

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7

all monopolies experience

economies of scale

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8

monopolies always produce within

the elastic range of their demand curve

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9

monopolies experience highest revenue when

producing at unit elastic range of demand curve

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10

in monopoly markets, there is always (think allocative and productive efficiency)

deadweight loss

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11

a monopoly is neither

allocatively nor productively efficient

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12

a monopoly is not allocatively efficient because

it always produces less than what society needs

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13

a monopoly is not productively efficient because

demand (price) is always above the ATC curve

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14

deadweight loss is graphed as where?

between the D, MR curve and on the right of profit-maxxing quantity

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15

price discrimination is when

a firm charges the most a customer is willing to pay

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16

What is a condition for effective price discrimination?

Separate markets based on price elasticity of demand

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17

What is a requirement for price discrimination regarding resale?

No resale opportunities

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18

What should price differences not be based on in price discrimination?

Cost differences

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19

What type of firm is necessary for price discrimination to occur?

A price maker

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20

in terms of demand curve is equal to what, in price discrimination...

demand curve is always also the marginal revenue curve

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21

what happens to consumer surplus when price discrimination?

no surplus, all is taken by production firm

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22

natural monopoly is when

one firm supply at lower LRATC than if there were multiple firms

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23

natural monopoly examples

gas company, water company, electricity company, etc

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24

socially optimal pricing is when monopoly is forced to produce at

quantity where MC curve meets Demand curve

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25

fair-pricing is when the monopoly

experiences normal profits, produces quantity where ATC curve meets Demand curve

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26

what is the price of monopoly market?

where vertical line of profit-maxxing quantity meets demand curve

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27

what is operating cost of monopoly market graphically represented as?

below meeting point of ATC curve and price-maxxing quantity line, and left of price-maxxing quantity

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28

when ATC = Demand

productively efficient

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29

when MC = demand

allocatively efficient (socially efficient)

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