7/29/2019 Chapter 24 Monpoly

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1. Monopoly: a market containing a single firm

2. Monopolist: Firm that is the only seller in the market

3. Entry Barrier: New firms cannot enter the industry

4. Economics of scale occur when: the firm as a decreasing

average cost over many outputs

Entry barrier5. Natural Monopoloy: high fixed/set up costs

entry barrier

6. Patents are created to (2 things): innovate, reward creativity

7. Tariff: Tax on an imported good

8. Barriers created by the firm (3): Buying all the resources

Predatory pricing

Threats

9. A monopoly will keep getting profits if: entry barriers still

exsist

10. Demand curve is: downward sloping

11. Linear Demand =:AR curve (average revenue)

12.AR=: a-bQ

-b=slope

13. MR=: a-2bQ

14. Total Revenue=: Price x Quantity

15. MR is postive, zero, negative because: TR (U shaped curve)

peaks at elastic point (0) and goes back down

16. If ____ is bigger than the _____ we have negative

marginal revenue: Loss, gain

17. The marginal revenue curve (MR) is: downward sloping

18. Maximize profit where Q=: MR=MC19. Maximize profit where Price is: > MR=MC

20. Price is determined by: the shape of the demand curce

21. Monopolies do not have: supply curves

22. Monopoly creates an inefficent market when there is:

DWL

23.A single price monopoly is ALWAYS on the ______ part

of the demand curve: Elastic

24. Price discrimination: firm sells identical products for

different prices

senior discount, student discount

difficult to resell

25. arbitrage:buy low, sell high

26. price discrimination amount output units: sells units at a

different price

perfect

efficient (no DWL)

27.A monopolist using price discrimination will produce

______ than a single price monopolist: more

28. Market segmentation: sells to inelastic (higher price) and

elastic(lower price) consumers

29. Set price equal to marginal cost: marginal cost pricing

30. Set price equal to average cost: average cost pricing

31. Low constant MC and decreasing AC: how to regulate a

natural monopoly

32. Good thing about marginal cost pricing: allocative

efficiency P=MC

33. Bad thing about marginal cost pricing: subsizied, noincentive to keep prices low and upgrade

34. Good thing about average cost pricing: firm can cover costs

35. Bad thing about average cost pricing: P>MC (inefficent),

no cost lowing intentives

36. Two part tariff (scheme): pay twice for the same good

37. Good thing about two part tariff: firm can cover costs,

efficient (P=MC)

38. Bad thing about two part tariff: hard to estimate number of

consumers in market and entry fee

39. Rate of return: allows a monopolist to earn a fair return on

investment

40. Good thing about rate of return: earn profit, innovate,

improve

41. Bad thing about rate of return:what is fair?, legit and not

legit costs

42. Price cap: price ceiling

43. Good thing about price caps: has a true incentive to keep

costs low

44. Bad thing about price caps: quality may decrease, firm could

do too well

45. Profit sharing: firm can make a sertain level of return but the

rest must be shared

46. Good thing about profit sharing: keep costs low

47. Bad thing about profit sharing: firm may change behavior

when near cut off, firm might gold plate

48. Gold plating: taking profits and turning them into costs so the

dont have to share

49. Regulator: needs to remain popular with the consumer

ECON 102 Chapter 24- MonopolyStudy online at quizlet.com/_aja2j