ECON101 Lecture Notes - Lecture 10: Oligopoly, Profit Maximization, Marginal Revenue

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scarletpanda765

10 Aug 2016

School

University of Waterloo

Department

Economics

Course

ECON101

Professor

Emmanuel Carvahlo

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ECON101 Full Course Notes

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Market structure or industry composed of one firm. Since there is only one firm in the industry, the industry in effect = the firm. There are no perfect substitutes for the commodity that the company supplies. Firm has complete knowledge of current and future market conditions. Goal of the firm is to maximize profits, and if the monopolists are going to maximize profits, must push marginal revenue = marginal cost. With the respect to exit, monopoly is free to leave industry, industry disappears; Entry however is blocking, barriers to entry contribute to the formation and sustainability of monopoly market structures. Firm is offered a market franchise, firm is given the privilege of offering (the only entity allowed to offer) the product in a particular jurisdiction. Patent: company gets patent on method of production or product, this means the company is the only business able to supply the product in the jurisdiction.

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

byzantiumfish483

Why can a monopolist continue to make positive profits even inthe long-run while a perfectly competitive firm can make only zeroeconomic profits in the long-run?

A.Because a monopoly only has one firm while perfect competitionhas many.

B.Because monopoly has barriers to entry and perfect competitionhas free entry.

C.Because perfect competition has barriers to entry and monopolyhas free entry.

D.Because in perfect competition everyone produces the same productand because in monopoly there are no close substitutes

2. Because of a patent, Alcoa is the only manufacturer of soda canswith a stay-put tab. Alcoa can earn a profit on the sale of sodacans with stay-put tabs

A. in the short run but not in the long run because new firms canenter the industry in the long run.

B. only in the long run because government regulations preventmonopolists from earning profits in the short run.

C. in the long run but not the short run because the monopolistwill face competition in the short run.

D. not only in the short run but also in the long run because entryinto the industry by new firms is blocked until the patentexpires.

yellowprairie-dog536

1. Which characteristic led to Microsoft exercising monopoly power?

A.copyright protection for the Windows operating system

B .no close substitutes

C.economies of scale

D.government franchise

2. The goal of antitrust law is to:

A. prevent monopolies and monopoly power from arising.

B.protect monopolies from the competition.

C. make sure consumers pay high prices.

D. preserve allocative inefficiencies of monopolies.

3. Which of the following is not a characteristic of a monopoly?

A. The market has just one seller.

B.There exist significant barriers to entry.

C. Substitutes for the monopolist's products are available to buyers.

D. No close substitutes exist for the monopolist's products.

4. A constantly declining long-run average cost curve is a characteristic of what type of industrial structure:

A. Monopoly

B. Natural monopoly

C. Oligopoly

D. Perfect competition

5. An industry that has large economies of scale operates most efficiently as a(n):

	A.competitive industry.
	B.monopoly
	C.regulated natural monopoly.
	D.anarchic industry.

goldcattle908

ECON101 Lecture Notes - Lecture 10: Oligopoly, Profit Maximization, Marginal Revenue

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