ECON 208 Chapter Notes - Chapter 10: Price Discrimination, Marginal Revenue, Profit Maximization

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ECON 208 Full Course Notes

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Econ 208 chapter 10 monopolies, cartels, and price discrimination. Monopoly: a market containing a single firm. Monopolist: a firm that is the only seller in a market. Alex hale it is the market structure that allows for the maximum exercise of market power on the part of the firm. A monopolist faces a downward-sloping market demand curve: since the monopolist is the sole producer, the demand curve it faces is also the market demand curve. A monopolist faces a negatively sloped demand curve if the monopolist charges the same price for all units sold, its total revenue (tr) is: Average revenue (ar) is total revenue divided by quantity: (cid:1844)= (cid:1843, (cid:1844)=(cid:3019)(cid:3018)= (cid:3018)(cid:3018) , (cid:1844)= (cid:3019) (cid:3018) of production: Marginal revenue (mr) is the total revenue resulting from the sale of an additional unit: the monopolist must reduce prices in order to increase its sales therefore, the mr curve is below the demand curve.

Related Questions

8. SMC always passes through the

a. minimum of both short run total cost curve and short run variable cost curve.

b. minimum of both short run average cost curve and short run average variable cost curve.

c. minimum of the long run average curve.

d. minimum of the short run average cost curve only.

9. In the first-degree price discrimination consumer surplus is

a. determined by elasticity of demand.

b. determined by the difference between P and MR

c. determined by area under the demand curve minus price.

d. zero.

10. A price taker firm faces a

a. perfectly elastic demand curve

b. declining marginal revenue

c. perfectly elastic supply curve

d. declining market demand curve

11. For a discriminating monopolist, the price is usually

a. higher in the market which has elastic demand

b. higher in the market which has inelastic demand.

c. lower in the market which has inelastic demand

d. higher in the market which as higher marginal revenue.

12. At the point of inflection on the total cost curve.

a. marginal and average costs are equal.

b. marginal cost is maximum.

c. marginal cost is minimum.

d. average cost is minimum.

e. marginal product is minimum.

13. A discriminating monopolist must allocate output by the law of

a. equi-marginal utility c. equi-marginal productivity

b. equi-marginal revenue d. equi-marginal cost

byzantiumsalmon293

1. The effect of a tariff

Select one:

a. is negligible since it applies to firms outside the U.S.

b. can lead to economies of scale for firms inside the U.S.

c. can lead to a monopoly advantage for firms inside the U.S. since they become the sole suppliers inside the U.S.

d. will be more beneficial to large firms than too small firms.

2. The monopolist faces a demand curve that

Select one:

a. is perfectly horizontal at the market price.

b. is below the marginal revenue curve.

c. is downward sloping.

d. coincides with the industry supply.

pucetiger202

Answer the following questions pertaining to monopolist production.

1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?

a. Marginal revenue will decrease, but profits will increase.

b. Marginal revenue will increase, but profits will decrease.

c.Total revenue will decrease, but profits will increase.

d.Both total revenue and profits will decrease.

e. Both total revenue and profits will increase.

2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

a.The firm's price is equal to its average revenue.

b.The firm cannot affect the market price for its good.

c.It is difficult for other firms to enter the industry.

d. The demand for the firm's product is unit elastic.

e.The firm must lower its price in order to sell more of its product.

3) Monopolies are inefficient for which of the following reasons?

a. They produce too little of the good.

b.They produce too much of the good.

c. They do not produce an output level at which marginal cost equals marginal revenue.

d. The marginal cost of producing the good is too low.

e. The firm is too large.

4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?

a. Price equals average total cost.

b. Price is greater than the marginal cost.

c. Average total cost is at its minimum level.

d. Marginal revenue is greater than marginal cost.

e. Marginal cost is minimized.

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ECON 208 Chapter Notes - Chapter 10: Price Discrimination, Marginal Revenue, Profit Maximization

ECON 208 Full Course Notes

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