EC120 Chapter Notes - Chapter 15: Deadweight Loss, Price Discrimination, Monopoly Profit

95 views8 pages

plumbeaver231

17 Oct 2012

School

Department

Course

Professor

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

carminegrasshopper545 and 38337 others unlocked

EC120 Full Course Notes

Verified Note

30 documents

Document Summary

While a competitive firm is a price taker, a monopoly firm is a price maker. The market price of windows is many times the marginal cost. Customers of monopolies might seem to have little choice but to pay whatever the monopoly charges. Monopolies cannot achieve any level of profit they want, because high prices reduce the amount that their customers buy. Although monopolies can control the price of their goods, their profits are not unlimited. Monopoly firms, like competitive firms aim to maximize profit. The government keeps a close eye on microsoft"s business decisions. A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes. The fundamental cause of monopoly is barriers to entry: a monopoly remains the only seller in its market because other firms cannot enter the market and compete with it. Barriers to entry, in turn, have three main sources: monopoly resources.

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.

goldcattle908

6) Monopolistic competition differs from monopoly because in monopolistic competition A) firms maximize profits. B) firms are free to enter and exit. C) firms set marginal revenue equal to marginal cost to maximize profit. D) All of the above are differences between monopoly and monopolistically competitive firms. E) None of the above are differences between monopoly and monopolistically competitive firms.

Both monopolies and competitive firms:

a. are price-takers

b. are price-makers

c.face barriers to entry

d. make long-run economic profits

e. try to maximize profits