Log in
HomeClass Notes1,200,000US530,000

ECON 2 Lecture Notes - Lecture 20: Marginal Revenue, Demand Curve, Marginal Cost

7 views2 pages
School
Irvine Valley College
Department
Economics
Course
ECON 2
Professor
Collinson

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

In a purely competitive market, only firms that use the least cost production method survive. What are some characteristics that make a firm a monopoly: a monopoly is a firm that is the only producer of a product or a service supplied to a particular market. Monopolies are not looking to achieve high price; they are looking to achieve high profits. In fact they are looking for the maximum profit possible. The downward sloping demand curve tells us that the only way to increase the quantity sold is to reduce the price. That means that the marginal revenue (mr) is less than the price of the additional units sold. Because the price was lowered on the additional units sold and on all the units that would have been sold at the previous higher price. To maximize profit, a monopoly produces the quantity at which marginal revenue equals marginal cost: if mr = mc profit is at the maximum level.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECON 2 Lecture Notes - Lecture 27: Monopolistic Competition, Productive Efficiency, Product Differentiation
rosebuffalo981
ECON 2 Lecture Notes - Lecture 12: Marginal Cost, Marginal Revenue, Perfect Competition
rosebuffalo981
ECON 2 Lecture Notes - Lecture 26: Long-Distance Calling, Monopolistic Competition, Natural Monopoly
rosebuffalo981

Related Questions

7. In December 2004, the oil-producing nations of OPEC began reducing output to keep prices above $40 per barrel. In doing this, OPEC was acting as a monopoly even though there was more than one producer. OPEC is a: (Points: 5)
a. cartel.
b. price taker.
c. producer in a contestable market.
d. producer in a monopolistically competitive market.


8. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a: (Points: 5)
a. horizontal demand curve and price equal the marginal cost in equilibrium.
b. horizontal demand curve and price exceeds the marginal cost in equilibrium.
c. downward-sloping demand curve and price equal the marginal cost in equilibrium.
d. downward-sloping demand curve and price exceeds the marginal cost in equilibrium.


9. Suppose an industry only has four firms and they each have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl-Hirschman index of this market is closest to which of the following? (Points: 5)
a. 8
b. 32
c. 66
d. 264

Demand for waste disposal in some region is given by the formula P = a – bQ (usual notation). The market for waste disposal is purely competitive. The marginal cost for all firms is constant and equal to c. Assume that as a consequence of the issuance of a directive concerning waste disposal, a license for this activity is granted only to one firm. a) How will this influence social welfare (consumer and producer surplus)? b) Find the deadweight loss resulting from the monopoly for the case when demand is given by the formula P = 150 – Q and the marginal cost for each firm is MC = 200q. Assume that initially in the competitive market there were 50 firms and that production possibilities of the monopolist are the same as those of the 50 firms taken togeth

6. The Herfindahl index is calculated by (Points: 5)
a. adding the squared value of the market shares of all the firms in the industry.
b. multiplying the squared value of the market shares of all the firms in the industry.
c. adding the percentage of industry output produced by the largest four firms.
d. adding the percentage of industry output produced by the largest eight firms.


7. In December 2004, the oil-producing nations of OPEC began reducing output to keep prices above $40 per barrel. In doing this, OPEC was acting as a monopoly even though there was more than one producer. OPEC is a: (Points: 5)
a. cartel.
b. price taker.
c. producer in a contestable market.
d. producer in a monopolistically competitive market.


8. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a: (Points: 5)
a. horizontal demand curve and price equal the marginal cost in equilibrium.
b. horizontal demand curve and price exceeds the marginal cost in equilibrium.
c. downward-sloping demand curve and price equal the marginal cost in equilibrium.
d. downward-sloping demand curve and price exceeds the marginal cost in equilibrium.


9. Suppose an industry only has four firms and they each have 10 percent, 8 percent, 8 percent, and 6 percent of the market. The Herfindahl index of this market is closest to which of the following? (Points: 5)
a. 8
b. 32
c. 66
d. 264


10. A good which if supplied to one person is supplied to all and whose consumption by one individual does not prevent its consumption by another individual is known as (Points: 5)
a. a private good.
b. a public good.
c. an external good.
d. an internal good.


11. An effluent fee is: (Points: 5)
a. a fee requiring market participants to certify they have reduced total consumption-not necessarily their own individual consumption.
b. charges imposed by the government on the level of pollution created.
c. a fee paid by users of a public good.
d. charges imposed on the wealthy of our society to help pay for those less fortunate.