ECON 1000 Chapter Notes - Chapter 12: Natural Monopoly, Price Discrimination, Price Ceiling

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alanw

10 Jan 2020

School

York University

Department

Economics

Course

ECON 1000

Professor

Karen Bernhardt-Walther

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ECON 1000 Full Course Notes

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If demand is elastic, lowering prices will increase marginal revenue. Revenue gain from more units sold outweighs revenue loss from lowered price. If demand is inelastic, lowering prices will decrease marginal revenue. If demand is unit elastic, marginal revenue remains unchanged. Revenue gain is equal to revenue loss: price and output decision, monopolies still act as normal firms in that they try to maximize economic profit. This is achieved when mr = mc: unlike normal firms, monopolies will produce the profit-maximizing quantity and sell it for the highest price it can get. Price exceeds marginal revenue so it also exceeds marginal cost: comparing monopolies and competition, price and output, perfect competition. In perfect competition, the market supply curve is the sum of the supply curves of many individual firms in the market: equilibrium occurs where the supply and demand curves meet.

Related Questions

When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale, the ____.

A) firm is a single-price monopoly

B) good that the industry produces has close substitutes

C) firm is a natural monopoly

D) firms are protected from competition by a legal barrier

carminegoldfish488

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

Select the correct answer:

A (legal; natural) monopoly exists when one firm can meet the entire market demand at a lower average total cost than two or more firms could.

A monopoly that is able to sell different units of a good or service for different prices is a (natural-price; price-discriminating) monopoly.

The act of obtaining special treatment by the government to create an economic profit is called (government surplus; rent seeking).

Regulated firms have an incentive to inflate their costs under (rate of return; price cap) regulation.

The U.S. Postal Service has a (natural; legal) monopoly on first class mail delivery.

A (single-price; price discriminating) monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost and then charging the maximum price that consumers are willing to pay for that quantity.

The key idea behind price discrimination is to convert (consumer surplus; producer surplus) into economic profit.

ECON 1000 Chapter Notes - Chapter 12: Natural Monopoly, Price Discrimination, Price Ceiling

ECON 1000 Full Course Notes

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