ECN 104 Chapter Notes - Chapter 13: Monopolistic Competition, Natural Monopoly, Demand Curve

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greenhedgehog390

17 Nov 2016

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Perfect competition- many producers, goods are identical. Oligopoly- a few producers, goods are identical and differentiated. Monopolistic competition- many producers- goods are differentiated. A monopolist is a firm where there is only one producer producing the goods and there are no close substitutes for that product. An industry controlled by a monopolist is called a monopoly. The ability of a monopolist to raise the product"s price above the competitive level by reducing output is called market power. A monopolist has market power, which means they can increase price and reduce the output produced. This output would be less than the output in a competitive industry. This ends up making the monopolist profit, both in the short-run and the long run. Profits will not continue in the long run unless there is a barrier to entry. A natural monopoly occurs when increasing returns to scale provide a large cost advantage to one firm that produces all of the industry"s output.

Related Questions

1. Which market structure is characterized by a few interdependent firms?

A) Monopoly.

B) Perfect competition.

C) Monopolist competition.

D) Oligopoly.

2. The correct ranking (put in order) of the degree of market power (from highest to lowest) is

A) Monopoly, monopolistic competition, perfect competition, oligopoly

B) Monopoly, monopolistic competition, oligopoly, perfect competition.

C) Monopoly, oligopoly, monopolistic competition, perfect competition.

D) Oligopoly, monopoly, monopolistic competition, perfect competition.

3. The term monopolistic competition

A) is an alternate expression for monopoly

B) is used to describe perfect competition with strong entry barriers.

C) denotes an industry with one seller of many differentiated products

D) denotes an industry with many sellers of differentiated products.

ceruleanseal203

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

Which of the following is TRUE?

Select one:

a. Monopoly results in a higher quantity of output being sold compared with perfect competition.

b. Price discrimination occurs when there are differences in prices that reflect differences in marginal cost.

c. Charging all customers the same price when costs vary can actually be a case of price discrimination.

d. Price discrimination guarantees that the monopolist will make a profit.

Which of the following statements is TRUE?

Select one:

a. At the monopolist's equilibrium, resources are being efficiently allocated.

b. With a monopoly, the value to society of the last unit produced is less than it's production cost.

c. Monopolists raise the price and restrict production, compared to a competitive situation.

d. A monopolist always produces a higher level of output than would be produced if the market were competitive.

graycat195

ECN 104 Chapter Notes - Chapter 13: Monopolistic Competition, Natural Monopoly, Demand Curve

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