3250:200 Lecture Notes - Lecture 15: Market Power, Monopoly Price, Demand Curve

66 views3 pages

rosehound821

16 Nov 2017

School

Department

Course

Professor

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

Document Summary

Monopoly monopoly- a rm that is the sole seller of a product without close substitutes. A monopoly rm has market power, the ability to in uence the market price of the product it sells. A competitive rm has no market power, there are many rms, it is a price taker not a price maker. The main cause of monopolies is barriers to entry other rms cannot enter the market. In a competitive market, the market demand curve slopes downward. But the demand curve for any individual rm"s product is horizontal at the market price demand perfectly elastic- a competitive rm sells a product where there are many perfect substitutes. The rm can increase q without lowering p, so mr = p. A monopolist is the only seller, so it faces the market demand curve. To sell a larger q, the rm must reduce p ( the law of demand) Not a price taker, this mr cannot equal p.

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

A monopolist faces the following demand curve: P = 120 - .02Q . The rms cost function is given by C = 60Q + 25,000: Assume that the rm maximizes profits.

(a) What is the level of production, price, and total profit per week?

(b) What will be the level of production and price if the market was perfectly competitive?

(d) If the government decides to levy a tax of $14 per unit on this product, what will be the

new level of production, price, and government tax revenue?

(Hint: Suppose initially that consumers must pay the tax to the government.)

emeralddonkey695

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

3250:200 Lecture Notes - Lecture 15: Market Power, Monopoly Price, Demand Curve

Document Summary

Get access

Related Documents

3250:200 Lecture Notes - Lecture 4: Ceteris Paribus, Market Power, Demand Curve

3250:200 Lecture Notes - Lecture 16: Monopolistic Competition, Imperfect Competition, Perfect Competition

3250:200 Lecture Notes - Lecture 17: Root Mean Square, Oligopoly, Strategic Dominance

Related Questions