Microecon chapter 10

Question 1

Monopoly

Answer 1

Single seller of a good

Question 2

Monopoly arise when…

Answer 2

Barrier of entry

Question 3

Legal monopoly

Answer 3

Granted by government (Hydro, SAQ, Post office)

Question 4

Natural monopoly

Answer 4

Demand does not allow for more than 1 firm (AC falling over entire range of production)

Question 5

Network externalities

Answer 5

More users erecte a monopoly type situation

Question 6

If η > 1

Answer 6

P↓ and TR↑

Question 7

If η < 1

Answer 7

P↑ and TR↑

Question 8

If η = 1

Answer 8

ΔP = ΔQ (no ΔTR)

Question 9

MR on straight line demand curve

Answer 9

Same intercept as Dd curve, but twice the slope

Question 10

Monopoly produce in along ___ of the Dd curve

Answer 10

Elastic portion

Question 11

SR π maximization

Answer 11

If Q > 0, we produce if AR > AVC

Question 12

Monopolist is a ___ not a ___

Answer 12

Price maker, price taker

Question 13

Firm demand for monopoly is…

Answer 13

Market demand

Question 14

Cartels (2)

Answer 14

• Cooperation to restrict output
• Go from competitive solution to monopoly solution

Question 15

Does monopolist have a supply curve?

Answer 15

No

Question 16

Problem incentive to cheat

Answer 16

Q↑ -> π↑ (at the expense of cartel members)

Question 17

What happens to everyone cheats in a duopoly?

Answer 17

Competitive equilibrium

Question 18

Price discrimination

Answer 18

Charging different prices to different consumers

Question 19

Types of price discrimination (3)

Answer 19

• Charge each customer a different price
• Entry fee or rule discount
• Charge a different price to different groups, but the same price to all members of that group (Airline tickets)

Question 20

Requirement for price discrimination (3)

Answer 20

• Market power
• Different valuations of the product (demand)
• Prevent arbitrage (No reselling)

Question 21

Hurdle pricing (2)

Answer 21

• Start with a high price (hurdle)
• Lower prices for those willing to wait