question
Characteristics:
answer
1. one seller
2. No close substitutes
3. High barriers to entry
2. No close substitutes
3. High barriers to entry
question
What situations create barriers to entry?
answer
1. Government
a. patents & copyrights
b. public franchise
c. Tariffs & quotas
2. Control of a key resource
3. Network externalities
4. Natural monopoly
a. patents & copyrights
b. public franchise
c. Tariffs & quotas
2. Control of a key resource
3. Network externalities
4. Natural monopoly
question
Monopolists are ........
answer
price-makers, who face a downward sloping demand curve.
question
Natural Monopoly
answer
A situation in which economies of scale are so large that one firm can supply the entire market at lower ATC than can 2 or more firms.
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Network Externalities
answer
The usefulness of a good increases with the number of consumers who use it.
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Public Franchise
answer
Gov't designates a single firm as the only legal provider of a good.
question
Profit-maximizing monopolists......
answer
Set Q star where MR = MC. To get P star, @ Q star, go up to demand curve.
question
What 2 things happen when a monopolist lowers price to sell another unit?
answer
1. Sell an additional unit @ p = 12 (TR Increases by 12)
2. Get a lower price for any units they were previously selling (TR decreases).
2. Get a lower price for any units they were previously selling (TR decreases).
question
For a monopolist, MR < P....
answer
On all units after the first.
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