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ECON 040 Lecture Notes - Lecture 27: Marginal Revenue, Imperfect Competition, Demand Curve

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School
College of The Sequoias
Department
Economics (ECON)
Course
ECON 040
Professor
Kasun

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Document Summary

Monopoly: monopoly is a market structure where there is only one firm operating in the market. An example of an imperfectly competitive firm is a monopolist. There is one difference between perfectly competitive firm and a monopolist. Competitive firm faces a horizontal demand curve, meaning it can sell any number of units at the market price. This entails the marginal revenue is constant and equal to the market price. Monopolists demand curve is the same as the demand curve for the entire market and so it is unlikely to be horizontal (downward sloping demand curve). Due to its downward slope, monopolists need to reduce the price in order to increase the quantity sold. R represents change in revenues when the firm goes from selling 200 to 400 units (400 x sh. 65. Q represents the change in quantity sold (400 200 = 200 units)/ Hence mr = sh. 45 per unit of output.

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Related Questions

1. For a single-price monopoly, marginal revenue is

a. equal to the price for the first unit of output.

b. less than the price for all units of output after the first unit.

c. greater than price. horizontal.

d. a and b

 

 

2. The demand curve facing a monopolist is:

a) horizontal, the same as that facing a perfectly competitive firm.

b) upward sloping, the same as that facing a perfectly competitive firm.

c) downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

d) downward sloping, the same as that facing a perfectly competitive firm.

1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

 

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm

7. In December 2004, the oil-producing nations of OPEC began reducing output to keep prices above $40 per barrel. In doing this, OPEC was acting as a monopoly even though there was more than one producer. OPEC is a: (Points: 5)
a. cartel.
b. price taker.
c. producer in a contestable market.
d. producer in a monopolistically competitive market.


8. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a: (Points: 5)
a. horizontal demand curve and price equal the marginal cost in equilibrium.
b. horizontal demand curve and price exceeds the marginal cost in equilibrium.
c. downward-sloping demand curve and price equal the marginal cost in equilibrium.
d. downward-sloping demand curve and price exceeds the marginal cost in equilibrium.


9. Suppose an industry only has four firms and they each have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl-Hirschman index of this market is closest to which of the following? (Points: 5)
a. 8
b. 32
c. 66
d. 264