ECO 101 Chapter Notes - Chapter 11: Monopoly Price, Natural Monopoly, Market Power

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25 Oct 2016

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Pure monopoly- is an industry in which there is only one supplier of a product for which there are no close substitutes and in which it is very difficult or impossible for another firm to coexist. Requirements to be a pure monopoly: only one firm can be present in the industry, no close substitutes for the monopoly"s max exist, there must be reason why entry and survival of potential competitors is extremely unlikely. The government has often intervened in markets where a pure monopoly might otherwise prevail. Pure monopoly is a market form that is easier to analyze than the more common market structures that we will consider in the next chapter. The u. s postal service has a monopoly which is a law by congress. Exclusive production rights for a period to the inventors of certain products. Control of a scarce resource or input.

Related Questions

A firm that is a "pure monopoly" is:

		a. A seller of a highly advertised and differentiated product in a market with low barriers to entry in the long-run.
		b. The only seller of a good for which there are no good substitutes in a market with high barriers to entry.
		c. The only buyer of unique raw material.
		d. The producer of a product subsidized by the government.

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1. Which of the following is a characteristic of pure monopoly?

A. close substitute products

B. barriers to entry

C. the absence of market power

D. "price taking"

2. An example of a monopoly would be

A. one of many U.S. wheat farmers

B. one of the few U.S. automakers

C. AT&T cell phone service

D. the local water company

3. In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

A. monopoly

B. oligopoly

C. only perfect competition

D. only monopolistic competition

E. both perfect competition and monopolistic competition

4. Which of the following is the best example of a perfectly competitive market?

A. farming

B. diamonds

C. athletic shoes

D. soft drinks

E. electricity distribution

crimsonalligator541

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

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ECO 101 Chapter Notes - Chapter 11: Monopoly Price, Natural Monopoly, Market Power

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