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ECON-UA 2 Lecture Notes - Statics, Externality

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8 May 2014

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New York University

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Document Summary

A market (or firm) with: a single seller of the product, no close substitute for the product. Reasons that monopolies exist : barriers to entry, economies of scale ( natural monopoly , legal barrier. Government declaration government franchise or government. Either the government gives someone exclusive right to produce or produces it itself. A product has network externality when an increase in the number of users increases benefits for each user: predatory behavior. When the existing firm acts like a predator keeping out competitors: threats, consumption (buying up of competitors) As we move to our long run equilibrium: entry demands for inputs no change in price of inputs no shift in. Lratc: exit demand for inputs no change in price of inputs no shift in. As we move to our long run equilibrium: entry demands for inputs price of inputs lratc , exit demands for inputs price of inputs lratc .

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Related Questions

1. Which characteristic led to Microsoft exercising monopoly power?

A.copyright protection for the Windows operating system

B .no close substitutes

C.economies of scale

D.government franchise

2. The goal of antitrust law is to:

A. prevent monopolies and monopoly power from arising.

B.protect monopolies from the competition.

C. make sure consumers pay high prices.

D. preserve allocative inefficiencies of monopolies.

3. Which of the following is not a characteristic of a monopoly?

A. The market has just one seller.

B.There exist significant barriers to entry.

C. Substitutes for the monopolist's products are available to buyers.

D. No close substitutes exist for the monopolist's products.

4. A constantly declining long-run average cost curve is a characteristic of what type of industrial structure:

A. Monopoly

B. Natural monopoly

C. Oligopoly

D. Perfect competition

5. An industry that has large economies of scale operates most efficiently as a(n):

	A.competitive industry.
	B.monopoly
	C.regulated natural monopoly.
	D.anarchic industry.

A natural monopoly exists when

a. a monopolist produces a product, the main component of which is natural wood.

b. economies of scale are so large that only one firm can survive and achieve low average total cost in the long run.

c. a firm is the exclusive owner of a key resource necessary to produce the firm's product.

d. there are many close substitutes for a firm's product

When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale, the ____.

A) firm is a single-price monopoly

B) good that the industry produces has close substitutes

C) firm is a natural monopoly

D) firms are protected from competition by a legal barrier

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