EC 201 Lecture Notes - Lecture 10: Rent-Seeking, Deadweight Loss, Economic Surplus

66 views5 pages

cerisegiraffe538

27 Feb 2018

School

Department

Course

Professor

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

Document Summary

Econ 201 lecture 10 notes- chapter 10: monopoly and price discrimination. Monopoly- a market in which a single firm sells a product that does not leave any close substitutes. Market power- the ability of a firm to affect the price of its product. Barrier to entry- something that prevents firms from entering a profitable market, creating a monopoly. Patent- the exclusive right to sell a new good for some period of time. Network externalities- the value of a product to a consumer increases with the number of other consumers who use it. Under a licensing policy, the government chooses a single firm to sell a certain product. A firm owning/controlling key resources can prevent entry of other companies by refusing to sell the input to other firms. Marginal revenue is change in total revenue that results from selling one more unit of output. Trade offs faced by a monopolist"s in cutting the price to sell a larger quantity.

Related Questions

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

byzantiumfish483

32) Marginal revenue is less than price for a single-price monopolist because the A) firm's output decisions do not affect the selling price. B) firm must lower its price for all units if it wants to sell more of the product. C) monopolist charges a price higher than the unit production cost. D) monopolist must worry about how its price setting will lead to entry by other firms. E) monopolist has achieved economies of scale.

1. Patent laws:
reduce incentive to innovate by restricting market entry
reduce incentive to innovate by making it difficult to use thepatented innovation
increase incentive to innovate by restricting entry into amarket
increase incentive to innovate by giving a firm permanent andexclusive production rights

2. Which of the following is true of marginal revenue for amonopolist that charges a single price?
P = MR because there are no close substitutes for the monopolist'sproduct.
P > MR because the monopolist must decrease price on all unitssold in order to sell an additional unit.
P < MR because the monopolist must decrease price on all unitssold in order to sell an additional unit.
AR = MR because there are no close substitutes for the monopolist'sproduct.

3. Negative marginal revenue means that
total revenue is decreasing as output increases
the firm is maximizing its total revenue
the firm is maximizing its economic profit
total revenue is increasing at a decreasing rate as outputincreases

4. A profit-maximizing monopolist produces an output level atwhich
marginal revenue is the greatest distance from marginal cost
price is less than marginal cost
the value to society of the last unit produced equals marginalcost
marginal revenue equals marginal cost

5. Compared to a perfectly competitive market, a monopoly tends toproduce
more output and charge a higher price
the same amount of output, but charge a higher price
less output and charge a higher price
less output and charge the same price

6. Monopolistic competition is best described as
many firms with some control over price, and some productdifferentiation
many firms with no control over price, producing identicalproducts
a few firms with some control over price, producing highlydifferentiated products
a few firms with no control over price, producing similarproducts

7. Which of the following characteristics does perfect competitionshare with monopolistic competition?
price-taking firms
zero long-run economic profit
homogeneous product
some barriers to entry

8. Monopolistically competitive firms do not achieve productiveefficiency because
entry of firms raises production costs in the long run
barriers to entry allow profit to be earned in the long run
price is greater than marginal cost at the profit maximizing outputlevel
profit is maximized at a quantity where average total cost is notminimized

9. There are multiple models of pricing behavior in oligopolisticmarkets because
it is difficult to predict how rival firms will react to anypricing decision
the demand curve slopes upward for these firms
firms could earn profit in the long run unlike other markets
price has a direct impact on profit for a firm in oligopoly

10. Which of the following is likely to occur when a two-persongame can be played repeatedly?
Collusion and cooperation among the players
The prisoner's dilemma
The industry demand curve will become perfectly elastic
The industry demand curve will become perfectly inelastic

EC 201 Lecture Notes - Lecture 10: Rent-Seeking, Deadweight Loss, Economic Surplus

Document Summary

Get access

Related Documents

EC 201 Lecture Notes - Lecture 11: Product Differentiation, Marginal Cost, Oligopoly

EC 201 Lecture Notes - Lecture 15: Firstclass, Natural Monopoly, Price Discrimination

ECON 102 Lecture Notes - Lecture 12: Natural Monopoly, Demand Curve, Market Power

Related Questions