EC120 Lecture Notes - Electric Power Transmission, Natural Monopoly, Demand Curve

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20 Dec 2013

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A firm that is the sole seller of a product without close substitutes pure monopoly rare. Having a large market share and few significant competitors. Key difference between monopoly and perfect competition is that a monopoly firm has market power, the ability to influence the market price of the product it sells. Natural entry barriers often arise due to economies of scale when the lrac curve is negatively sloped over a large range of output, big firms have a cost advantage over smaller firms. Occurs when the industry"s demand conditions allow no more than one firm to cover its costs while producing at its minimum efficient scale (mes) Usually, this happens because there is some lumpy required input: exists only in large form. Ex: electrical power transmission the lumpy input is the transmission grid (the wires) Telephone companies used to be natural monopolies, railroads still are based on lumpiness of networks of wires or rails.

Related Questions

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

A natural monopoly exists when

a. a monopolist produces a product, the main component of which is natural wood.

b. economies of scale are so large that only one firm can survive and achieve low average total cost in the long run.

c. a firm is the exclusive owner of a key resource necessary to produce the firm's product.

d. there are many close substitutes for a firm's product

cyangnat561

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

EC120 Lecture Notes - Electric Power Transmission, Natural Monopoly, Demand Curve

EC120 Full Course Notes

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