AP Microeconomics - CH. 15 Monopoly

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For all firms...

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the average revenue equals the price of a good

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Characteristics of a Monopoly

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A single large firm
A unique produce
No firms can enter the industry
They are price makers

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Natural Monopoly

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A firm can supply a product at a lesser cost than multiple firms

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For firms that are a Monopoly...

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marginal revenue is less than its price

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When a Monopoly increases the amount it sells, the Output Effect states...

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that more output is sold, which increases total revenue

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When a Monopoly increases the amount it sells, the Price Effect states...

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that price falls, which decreases total revenue

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Profit Maximization for Monopolistic Firms

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Produce where MR = MC

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Price is equal to MC for Competitive Markets, but for Monopolies...

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price exceeds MC

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Profit Formula

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TR - TC or (P - ATC) x Q

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What point would you produce at to Maximize Total Surplus?

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Where MC = D

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Price Discrimination

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Selling the same good at a different price to different customers. Ex. Selling a textbook at a lower price in Europe than in the U.S

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Ways to regulate Monopolies

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Enforce Antitrust laws
Regulate their Behavior
Public Ownership
Do Nothing

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Graph of a Monopoly

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Any point on the demand curve before where the price is 0 at the MR point

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Graph of a Natural Monopoly

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Any point on the demand curve after where the price is 0 at the MR point

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Where is the Elastic Range on the Demand Curve?

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Produce where the MR is 0

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Where is the Inelastic Range on the Demand Curve?

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Its located where MC = D and it creates deadweight loss

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Revenue Maximizing Quantity

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Where ATC = D

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Where is the Social Optimal Quantity (Allocative Efficiency) and what does it create?

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The downward sloping demand curve makes marginal revenue less than the price and profit maximization requires MR = MC

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Where is a Quantity with no Economic Profit?

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They charge a higher price, don't produce enough, and produce at higher costs

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Why does Price exceed Marginal Cost?

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Produce where MR is 0

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What makes Firms Inefficient?

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P=MC

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How to Maximize Total Revenue on a Graph

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P=MC

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Allocatively Efficient Point on a Monopoly Graph

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No deadweight loss
No Consumer Surplus
All Profit for the monopolist

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Perfect Price Discrimination on a Monopoly Graph

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ATC

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Characteristics of Perfect Price Discrimination

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P=ATC

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Where would a natural monopolist want price regulated?

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P=ATC

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Where is fair return price for a natural monopolist?

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zero economic profit

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Where is zero economic profit on a monopoly graph?

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undefined

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Normal profit is also referred to as

answer

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1 of 29

question

For all firms...

answer

the average revenue equals the price of a good

question

Characteristics of a Monopoly

answer

A single large firm
A unique produce
No firms can enter the industry
They are price makers

question

Natural Monopoly

answer

A firm can supply a product at a lesser cost than multiple firms

question

For firms that are a Monopoly...

answer

marginal revenue is less than its price

question

When a Monopoly increases the amount it sells, the Output Effect states...

answer

that more output is sold, which increases total revenue

question

When a Monopoly increases the amount it sells, the Price Effect states...

answer

that price falls, which decreases total revenue

question

Profit Maximization for Monopolistic Firms

answer

Produce where MR = MC

question

Price is equal to MC for Competitive Markets, but for Monopolies...

answer

price exceeds MC

question

Profit Formula

answer

TR - TC or (P - ATC) x Q

question

What point would you produce at to Maximize Total Surplus?

answer

Where MC = D

question

Price Discrimination

answer

Selling the same good at a different price to different customers. Ex. Selling a textbook at a lower price in Europe than in the U.S

question

Ways to regulate Monopolies

answer

Enforce Antitrust laws
Regulate their Behavior
Public Ownership
Do Nothing

question

Graph of a Monopoly

answer

Any point on the demand curve before where the price is 0 at the MR point

question

Graph of a Natural Monopoly

answer

Any point on the demand curve after where the price is 0 at the MR point

question

Where is the Elastic Range on the Demand Curve?

answer

Produce where the MR is 0

question

Where is the Inelastic Range on the Demand Curve?

answer

Its located where MC = D and it creates deadweight loss

question

Revenue Maximizing Quantity

answer

Where ATC = D

question

Where is the Social Optimal Quantity (Allocative Efficiency) and what does it create?

answer

The downward sloping demand curve makes marginal revenue less than the price and profit maximization requires MR = MC

question

Where is a Quantity with no Economic Profit?

answer

They charge a higher price, don't produce enough, and produce at higher costs

question

Why does Price exceed Marginal Cost?

answer

Produce where MR is 0

question

What makes Firms Inefficient?

answer

P=MC

question

How to Maximize Total Revenue on a Graph

answer

P=MC

question

Allocatively Efficient Point on a Monopoly Graph

answer

No deadweight loss
No Consumer Surplus
All Profit for the monopolist

question

Perfect Price Discrimination on a Monopoly Graph

answer

ATC

question

Characteristics of Perfect Price Discrimination

answer

P=ATC

question

Where would a natural monopolist want price regulated?

answer

P=ATC

question

Where is fair return price for a natural monopolist?

answer

zero economic profit

question

Where is zero economic profit on a monopoly graph?

answer

undefined

question

Normal profit is also referred to as

answer

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AP Microeconomics – CH. 15 Monopoly

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