EC120 Study Guide - Final Guide: Monopolistic Competition, Pigovian Tax, Nash Equilibrium

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EC120 Full Course Notes

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Mo(cid:374)opol(cid:455): a fi(cid:396)(cid:373) that"s the o(cid:374)l(cid:455) selle(cid:396) of a (cid:272)e(cid:396)tai(cid:374) p(cid:396)odu(cid:272)t, (cid:374)ot (cid:373)a(cid:374)(cid:455) (cid:272)lose su(cid:271)stitutes. They form their market power through entry barriers like: they own a key resource to production, they have exclusive rights to a product granted by the government, natural monopolies: 1 firm produces more efficiently than small firms. Ma(cid:396)ket de(cid:373)a(cid:374)d (cid:272)u(cid:396)(cid:448)e is the (cid:272)o(cid:373)pa(cid:374)(cid:455)"s de(cid:373)a(cid:374)d (cid:272)u(cid:396)(cid:448)e. Monopoly seller faces a negatively sloped de(cid:373)a(cid:374)d (cid:272)u(cid:396)(cid:448)e, (cid:373)ea(cid:374)i(cid:374)g the(cid:396)e"s a t(cid:396)ade-off between price changed and quantity sold. P(cid:396)i(cid:272)e is(cid:374)"t e(cid:395)ual to mr, mr is less tha(cid:374) p(cid:396)i(cid:272)e. Firms can change there revenue in 2 ways: quantity effect: increasing quantity to increase revenue, price effect: quantity sold increases due to lower prices. Should shut down if price is below avc. Exiting in the long run if price is below atc. Profit can be written using total revenue and cost or with atc and price (cid:1842)=((cid:1844)(cid:1843) (cid:1843)) (cid:1843) (cid:1842)=(cid:4666)(cid:1842) (cid:4667) (cid:1843) Selling the same good at different prices to different customers.

Related Questions

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

1. The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies: ( I put A)

to both perfectly competitive firms and monopolies

only to monopolies

only to perfectly competitive firms

only to firms that can employ discriminatory pricing strategies

2. If a monopolist or a perfectly competitive firm is producing at a break-even point, then: ( I put II, IV)
i. average revenue is equal to average variable cost
ii. average revenue is equal to the o average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to the total cost

iii

I and iii

ii and iv

3. What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common? (I put A)

they are all barriers to entry

they all help explain why a monopolists demand and marginal revenue curves are identical

they must all be present before a monopolist may practice price discrimination

they all help explain why a firm's short-run average total cost curve is U-shaped

bluemammoth421

Homework help and study guide help, all multiple choice

A monopolist:

A) can sell as much as it wants at the chosen price because it is the only seller.

B) can increase the price only if it is willing to decrease the quantity sold.

C) can increase the price and the quantity sold at the same time.

D) is not restricted by the law of demand.

A monopolistically competitive firm:

A) produces where marginal revenue equals marginal cost and charges the price consumers are willing to pay as given by the demand curve.

B) produces where marginal cost equals average total cost and charges the price consumers are willing to pay as given by the demand curve.

C) chooses price and quantity based on where the marginal cost curve meets the demand curve.

D) chooses price and quantity based on where the average total cost curve meets the demand curve.

21) Oligopoly is A) like a monopoly because there are barriers to entry. B) like perfect competition because oligopoly firms all sell homogeneous goods. C) like monopolistic competition because oligopoly firms all sell differentiated goods D) like perfect competition because there are many firms in the industry
ECON 1102 (Microeconomics) Test 4 (043015)

In ________ market structure, a firm's output depends ________.

A) an oligopoly; only on its own marginal revenue and marginal cost curves

B) a monopolistically competitive; in part on its competitors' price and quantity decisions

C) an oligopoly; in part on its competitors' price and quantity decisions

D) a monopolistically competitive; only on its marginal revenue curve

EC120 Study Guide - Final Guide: Monopolistic Competition, Pigovian Tax, Nash Equilibrium

EC120 Full Course Notes

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