ECO101H1 Lecture Notes - Lecture 20: De Beers, Natural Monopoly, Perfect Competition

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Eco100y1 lecture 20 topic 10: monopoly i. Perfect competition and monopolies are extreme cases. In a monopoly, there is a sole seller of a product/service without close substitutes. In monopolies, firms are price makers, not price takers. They have market power, the ability to influence market price. A perfectly competitive firm has no market power, they"re price takers. Remember that one of the assumptions of perfectly competitive markets is that firms are free to enter/exit the market in the long run. This is not the case in monopolies: a single firm owns a key resource. Debeers owns most of the world"s diamond mines: the government gives a single firm power by giving them the exclusive right to offer the product/service. Ex. patents and copyright law: there is a natural monopoly a single firm can produce the entire market quantity at a lower cost than several firms. Ex. providers of electricity or water, or those who own infrastructure like bridges.

Related Questions

1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm

graygrasshopper945

In which of the following ways is a monopoly beneficial to an economy?

A. Monopoly profits give firms more reason to invest in the creation of new products through research and development.

B. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market.

C. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers.

D. All of the above.

Which of the following is a difference between a perfectly competitive market and a monopoly?

A. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

B. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Although the fatality rate in this industry is so high, many workers still choose to work as loggers.

What could explain this?

A. Workers choose these high-risk jobs because they are willing to bear an occupational risk to earn a higher wage.

B. Low-risk jobs are already taken, so workers must choose their next-best alternative, which in this case is logging.

C. Workers in these industries lack human capital and must choose to work as loggers.

D. Loggers must be indifferent between low-risk and high-risk jobs.

In the case of a decrease in product prices:

A. the quantity effect always dominates the price effect.

B. the price effect always dominates the quantity effect.

C. when the price effect dominates the quantity effect, total revenue decreases.

D. when the quantity effect dominates the price effect, total revenue decreases

rubywalrus122

Question 16

If price is cut and demand is elastic, total revenue will rise because

		the change in quantity demanded is greater than the percent change in price.
		the percent change in quantity demanded is greater than the change in price.
		the percent change in quantity demanded is greater than the percent change in price.
		customers can't find substitutes.

3 points

Question 17

If price is cut and demand is inelastic, total revenue will fall because

		the change in quantity demanded is less than the percent change in price.
		the percent change in quantity demanded is less than the change in price.
		the percent change in quantity demanded is less than the percent change in price.
		customers can find substitutes.

3 points

Question 18

If something is addictive, then

price and demand are inversely related.

price elasticity of demand is equal to one.

demand is perfectly inelastic.

demand is perfectly elastic.

3 points

Question 19

In general, elasticities measure

		the change in quantity demanded when a product attribute changes.
		the change in consumer spending when income changes.
		the change in an attribute for a percentage change in price.
		the percentage change in the quantity demanded resulting from a fixed percentage change in some attribute.

3 points

Question 20

Average total costs are defined as

total costs divided by the change in output.

total costs divided by output.

the change in total costs when output changes.

average variable costs plus marginal costs.

3 points

Question 21

If a firm is experiencing economies of scale, then the long-run average cost curve is

falling.

rising.

horizontal.

shifting.

3 points

Question 22

If average total cost is rising

marginal cost is above average total cost.

marginal cost is rising.

marginal product is rising.

marginal cost is above average total cost and is falling.

3 points

Question 23

The period of time over which all inputs are variable is the

market horizon.

short run.

calendar year.

long run.

3 points

Question 24

The supply chain refers to

the supply curve.

the process of outsourcing.

the process of downsizing.

the process of creating and selling a product.

3 points

Question 25

When the capital (a fixed input) changes

short-run marginal costs rise.

short-run average total costs fall but do not shift.

labor inputs decline.

the short-run average total cost curve shifts.

3 points

Question 26

A market of price takers is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 27

A market with a single seller is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 28

A market that mainly stresses product differentiation is called

perfectly competitive.

monopolistically competitive.

a monopoly.

an oligopoly.

3 points

Question 29

Entry into a competitive market will continue until

economic profits are zero.

normal profits are zero.

when accounting losses are zero.

a. and b. are true

3 points

Question 30

Firms in an oligopoly

act independently.

engage in strategic behavior.

have perfect knowledge of the behavior of others.

openly collude.

ECO101H1 Lecture Notes - Lecture 20: De Beers, Natural Monopoly, Perfect Competition

ECO101H1 Full Course Notes

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Related Questions

		price and demand are inversely related.
		price elasticity of demand is equal to one.
		demand is perfectly inelastic.
		demand is perfectly elastic.

		total costs divided by the change in output.
		total costs divided by output.
		the change in total costs when output changes.
		average variable costs plus marginal costs.

		marginal cost is above average total cost.
		marginal cost is rising.
		marginal product is rising.
		marginal cost is above average total cost and is falling.

		the supply curve.
		the process of outsourcing.
		the process of downsizing.
		the process of creating and selling a product.

		short-run marginal costs rise.
		short-run average total costs fall but do not shift.
		labor inputs decline.
		the short-run average total cost curve shifts.

		perfectly competitive.
		monopolistically competitive.
		a monopoly.
		an oligopoly.

		economic profits are zero.
		normal profits are zero.
		when accounting losses are zero.
		a. and b. are true

		act independently.
		engage in strategic behavior.
		have perfect knowledge of the behavior of others.
		openly collude.

		falling.
		rising.
		horizontal.
		shifting.

		market horizon.
		short run.
		calendar year.
		long run.