Monopolies

Question 1

What is a monopoly?

Answer 1

A firm that is the sole seller of a product without close substitutes

Question 2

Are there barriers to entry in monopolies? If so, name them

Answer 2

Yes
Monopoly resources (they own a key resource)
Government regulation (government allows the single firm to own said key resource)
The production process ( can produce output at a lower cost than other firms)

Question 3

What is a natural monopoly?

Answer 3

A monopoly that can supply a good or service to an entire market at a lower cost than could other firms

Question 4

How does ownership result in monopolies?

Answer 4

Ownership gurantees that no one can sell the product/service without the owner’s permission

Question 5

Monopolists…

Answer 5

face downward sloping demand curves

Question 6

Why does the government create monopolies through patents?

Answer 6

To increase incentives for creative activity (think of shark tank)

Question 7

For a monopolist

Answer 7

Price = Average Revenue > Marginal Revenue

Question 8

The monopoly output is ____ than the perfectly competitive output

Answer 8

Lower

Question 9

The monopoly price is ____ than the perfectly competitive price

Answer 9

Higher

Question 10

The output produced by a monopolist is ___ because____

Answer 10

Inefficient; Marginal Cost = Marginal Revenue

Question 11

Monopolies have control over..

Answer 11

Price

Question 12

Monopolies maximize profit when..

Answer 12

The level of output ( Marginal Revenue) is equal to Marginal Cost just like competitive firms