ECON 1B03 Lecture Notes - Lecture 10: Monopolistic Competition, Profit Maximization, Natural Monopoly

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ECON 1B03 Lecture Notes - Lecture 9: Average Variable Cost, Club Good, Price Elasticity Of Demand

ECON 1B03 Lecture Notes - Lecture 10: Monopolistic Competition, Profit Maximization, Natural Monopoly

ECON 1B03 Lecture Notes - Lecture 12: Budget Constraint, Indifference Curve, Opportunity Cost

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Econ 1b03 lecture 10- monopolies and monopolistic competition. Chapter 9: monopoly: when there is only one seller of a good. Monopolies get to set their own price, since they are the only firm in the market. This makes them price setters: monopolies form because of barriers to entry, which are reasons why other firms cannot enter the market. There are three types of barriers: only one firm has access to a key resource that no other firm can access. These are rare today: the government has given a firm sole rights to a product. This can take the form of patents or copyrights: when a single firm can supply a good to the entire market for less than multiple firms. It arises from where the fixed costs are very high for the product, in comparison to the variable cost, so the average cost will be higher if there is more than one firm.

Related Questions

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

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32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

1. Which of the following is a characteristic of pure monopoly?

A. close substitute products

B. barriers to entry

C. the absence of market power

D. "price taking"

2. An example of a monopoly would be

A. one of many U.S. wheat farmers

B. one of the few U.S. automakers

C. AT&T cell phone service

D. the local water company

3. In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

A. monopoly

B. oligopoly

C. only perfect competition

D. only monopolistic competition

E. both perfect competition and monopolistic competition

4. Which of the following is the best example of a perfectly competitive market?

A. farming

B. diamonds

C. athletic shoes

D. soft drinks

E. electricity distribution

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ECON 1B03 Lecture Notes - Lecture 10: Monopolistic Competition, Profit Maximization, Natural Monopoly

ECON 1B03 Lecture Notes - Lecture 9: Average Variable Cost, Club Good, Price Elasticity Of Demand

ECON 1B03 Lecture Notes - Lecture 10: Monopolistic Competition, Profit Maximization, Natural Monopoly

ECON 1B03 Lecture Notes - Lecture 12: Budget Constraint, Indifference Curve, Opportunity Cost

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