ECON 2010 Lecture Notes - Lecture 25: Club Good, Monopsony, Perfect Competition

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ECON 2010 Full Course Notes

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Monopoly is one seller who sets the price. Labor unions and cell phone carriers are the closest things to american monopolies. Monopolies exist due to barriers to entry: ownership of a key resource (diamonds/oil, legal protection from the government (club goods, patents, etc. ). The government gives a single firm exclusive rights to a certain good: economies of scale (natural monopolies). One big firm can produce at a lower cost than every other small firm (cable companies). Then the big firms can chase the smaller firms out of the market completely. Intervention is when the government pays you back for your investment. Demand curves are perfectly horizontal for competitive firms. Output effect for monopolies: when quantity increases total revenue increases. Price effect for monopolies: when price decreases total revenue decreases. Over time the price effect will have a greater effect on monopolies but initially output effect has the larger impact.

Related Questions

If competition decreases in a certain industry

Select one:

a. it would not matter because competition has very little affect in a market economy.

b. A company that is in that industry may have and exert more economic power.

c. Resources will be allocated more efficiently

d. Prices will most likely be lower in that industry

Question 2

Question text

The Sherman Anti-Trust Act

Select one:

a. Gave monopolies a legal right to exist and grow

b. Gave all unions money to pay their members

c. Was a governmental attempt to promote and encourage competition.

d. Created new policies to ensure that workersâ compensation was given to all workers

Question 3

Question text

One reason the government is involved in the U.S. economy is to

Select one:

a. regulate industries in which a monopoly is in the public interest

b. encourage monopolies

c. discourage competition

d. promote the development of negative externalities

Question 4

Question text

Under perfect competition

Select one:

a. The buyers are usually uninformed

b. Market equilibrium sets the price of goods and services

c. The government determines how much of a good to produce.

d. The seller tends to spend much effort in advertising its product because of product differentiation.

Question 5

Question text

The Clayton-Anti Trust Act

Select one:

a. Was never passed

b. Helped monopolists grow wealthier

c. Was passed to lower the taxes on the most wealthy Americans

d. Outlawed price discrimination

ECON 2010 Lecture Notes - Lecture 25: Club Good, Monopsony, Perfect Competition

ECON 2010 Full Course Notes

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