MODULE 6 Flashcards
(33 cards)
What demand curve does a monopolist face?
The same demand curve as that for the entire market- a curve with a negative slope
Does a monopolist have ability to influence price?
Yes
Does a monopolistic competitor have the ability to influence price?
Some
What demand curve does a monopolistic competitor face?
An elastic demand curve
Does an oligopoly have an influence on price?
They are concerned with rivalry, and must consider others reactions of a price change and must respond to price changes of others
What is a kinked demand curve?
A demand curve with two segments, one fairy flat and one steep, with the kink or bend at the original price
What market often has kinked demand curve?
Oligopoly
How do oligopolies cooperate?
Price leadership, collusion, cartel
How are revenues for a monopolist?
Their average revenue is the same as the downward sloping market demand curve. Their marginal revenue is below its demand curve because price falls as quantity increases
How do monopolists profit maximize?
At the quantity where marginal revenue and marginal cost are equal. At this output, the monopolist charges the highest possible price as found on the demand curve
Do monopolists meet minimum cost pricing or marginal cost pricing at profit maximization?
No
What are other features of monopolies?
They charge a higher price and a lower quantity. Usually adopt average cost pricing in an effort to make regulated monopolies break even
What is regulation of natural monopolies?
A natural monopoly has a lower per unit cost than a competitive environment. Government intervenes to ensure that these cost savings are passed to the consumer
What is an example of a natural monopoly?
Canada post
Why do regulators apply average cost pricing?
So that the firm can break even without public funds
How are the revenues of a monopolistic competitor?
Average revenue curve is the same as its downward sloping demand curve
How do monopolistic competitors maximize profit?
Where marginal revenue and marginal costs are equal. In the short run, they may have a profit or loss, in the long run, they break even
If short run profits are made and new businesses enter the industry, which way does the monopolistic competitors demand curve shift?
To the left making them more elastic
Do monopolistic competitors meet minimum cost pricing or marginal cost pricing at profit maximization?
No, since too few units of output are being produced
How are revenues for an oligopolistic?
The businesses marginal revenue curve has two linear segments which are below its kinked demand curve
How do oligopolists maximize profits
Found where MR and MC are equal
What is game theory?
The analysis of how naturally independent actors try to achieve their goes through the use of strategy
What is the prisoners dilemma?
An example of how players self interested actions can be self defeating
What is anti-combined legislation?
Represents laws aimed at preventing industrial concentration and abuses of market power
