question
Which of the following is most unlikely to present a barrier to entry into a market?
answer
Deregulation
question
The two primary factors determining monopoly market power are the firm's
answer
demand curve and its cost structure
question
The largest cattle rancher in a given region will be unable to have a when a sufficient numbers of smaller cattle ranchers provide sources of competition.
answer
monopoly
question
The marginal revenue curve for a monopolist the market demand curve.
answer
always lies beneath
question
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
answer
output will be too small and its price too high.
question
A monopolist is able to maximize its profits by
answer
setting the price at the level that will maximize its per-unit profit.
question
Which of the following is most likely to be a monopoly?
answer
local electricity distributor
question
A exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
answer
natural monopoly
question
Marginal Revenue
answer
calculated by taking the change in total revenue divided by the change in total output quantity
question
Average Total Cost (ATC)
answer
Total cost divided by the quantity the firm is producing
question
Characteristics of a Monopoly
answer
1) Total barriers to entry
2) No Substitutes
3) No competitive pressure
4) A monopolist can operate semi-independent of consumer demand
2) No Substitutes
3) No competitive pressure
4) A monopolist can operate semi-independent of consumer demand
question
Market power
answer
the ability of a firm to alter the market price of a good or service
question
Competitive Competition
Monopoly
Monopoly
answer
- High profits attract more suppliers
- With free entry, supply shifts right and price falls
- Economic profits go to zero
- P = MC
- Profits are squeezed, so there is great pressure to reduce costs and improve quality
- Economies of Scale
- High profits, but barriers to entry exclude new suppliers
- No production change, so price does not fall
- Economic profits do not change
- P > MC
- No profit squeeze, so no pressure to reduce costs or improve quality
- With free entry, supply shifts right and price falls
- Economic profits go to zero
- P = MC
- Profits are squeezed, so there is great pressure to reduce costs and improve quality
- Economies of Scale
- High profits, but barriers to entry exclude new suppliers
- No production change, so price does not fall
- Economic profits do not change
- P > MC
- No profit squeeze, so no pressure to reduce costs or improve quality
question
Barriers to entry
answer
characteristics of a market or product that deter entry. Legal, technological, or market forces that discourage or prevent potential competitors from enetering a market
ex) patents, exclusive franchises, political appointments, control of key inputs
ex) patents, exclusive franchises, political appointments, control of key inputs
question
Natural Monopoly
answer
an industry in which a single operating firm is more efficient than competing firms
- Economies of scale acts as a 'natural' barrier to entry
- Economies of scale acts as a 'natural' barrier to entry
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