Deck 33: Monopoly, Power, Prices, and Profits

Question 1

Whats defention of terms:
-marginal revenue

Answer 1

the change in the total revenue a firm will receive as a result of the sale of one additional unit.

Question 2

Whats defention of terms:
-perfect monopoly

Answer 2

a single firm constitutes the entire industry

Question 3

Whats defention of terms:
-monopsony

Answer 3

situation in which a firm is the only buyer of a particular resource or intermediate product

Question 4

Whats defention of terms:
-natural monopoly

Question 5

Explain now monopoly markets differ from competitive markets
-What assumptions of a perfectly competitive market are violated? Explain.

Question 6

Explain now monopoly markets differ from competitive markets
-How does demand curve for individual monopolists differ from demand curve for individual firm in a perfectly competitive market? Explain.

Question 7

Understand the production and pricing decisions of a monopolist.
-How is profit maximizing quantity decision the same for a monopoly and for a firm in a perfectly competitive market? How is the pricing decision different? Explain.

Question 8

Understand the production and pricing decisions of a monopolist.
-How do monopolists maintain their monopoly? How does this violate assumptions of a perfectly competitive market? Explain

Question 9

Explain why monopolies are generally inefficient.
-Why is output different for a monopolist than for a firm in a perfectly competitive market?

Question 10

Explain why monopolies are generally inefficient.
-Can a monopolist set both price and quantity? Explain.

Question 11

Describe why and how monopolists increase revenue.
-Explain why monopolists put efforts into maintaining their monopoly.

Question 12

Describe why and how monopolists increase revenue.
-Explain how monopolists lower costs and increase demand.

Question 13

Explain the sources of a natural monopoly.
-What are some examples of natural monopolies?

Question 14

Explain the sources of a natural monopoly.
-How do traditional and progressive economists differ in their analyses of monopolies?

Question 15

List types of government regulation of monopolies and explain their effectiveness.
-State examples of great attempts to regulate monopolies.

Question 16

List types of government regulation of monopolies and explain their effectiveness.
-Explain why or why not government regulations are effective. Give examples.

Question 17

A perfect monopoly occurs when

A) one person owns all of the property.
B) one firm or seller constitutes the entire industry.
C) one firm has absolute power over price in an industry.
D) one firm is the only buyer of a particular good.

Question 18

If a monopolist wishes to sell a larger quantity then

A) he should leave price unchanged, since he can sell as much as he wants at the current price.
B) he should raise price, since he is a monopolist.
C) he should lower price, in order to increase quantity demanded.
D) he should lower output in order to increase price.

Question 19

Assume that Acme Anvil company is currently selling 100 anvils at a price of $5 each. Cost per anvil is $4. What is total revenue?

A) $5
B) $500
C) $400
D) $100

Question 20

Assume that Acme Anvil company sells 100 anvils at a price of $5 each. Cost per anvil is $4. What is total profit?

A) $5
B) $500
C) $400
D) $100

Question 21

Assume that Acme Anvil company sells 100 anvils at a price of $5 each. Cost per anvil is $4. What is total cost?

A) $5
B) $500
C) $400
D) $100

Question 22

The demand curve for the firm in a monopoly market is

A) upward sloping
B) downward sloping.
C) horizontal.
D) vertical.

Question 23

The demand curve for a firm in a perfectly competitive market is

A) upward sloping
B) downward sloping.
C) horizontal.
D) vertical.

Question 24

Which of the following would be an example of a protective tariff?

A) the government imposes a tax on imported toys containing lead paint in order to protect American children.
B) the government imposes a tax on imported steel to protect domestic steel producers from competition with lower prices imports.
C) the government imposes a tax on companies with high pollution levels in order to protect the environment.
D) the government imposes a tax on imported goods made with forced labor or child labor in order to protect American workers from competition with goods made under such conditions.

Question 25

A monopsony is

A) the only producer of televisions in Japan.
B) the only seller of a product in an industry.
C) the only buyer of a product in an industry.
D) the kind of music available before stereo.

Question 26

A natural monopoly is

A) a monopoly in a natural resource industry.
B) a monopoly in which minimum average cost is not reached until production saturates the market.
C) a monopoly in which minimum average cost occurs at any level of production.
D) a monopoly supplying a natural or organic product.

Question 27

Monopoly profits are considered "excess profits" when

A) the average cost curve is below average revenue.
B) the average revenue curve is below average cost.
C) the marginal cost curve intersects marginal revenue.
D) average revenue and marginal revenue are equal.