Monopoly

Question 1

A single seller/firm in a market ?

Answer 1

Monopoly

Question 2

Monopoly has ___________ to prevent other firms from entering a market and competing?

Answer 2

Barriers to Entry

Question 3

What makes monopoly illegal and subject to regulation and prosecution from congress of the president ?

Answer 3

Sherman and Clayton Anti trust acts (1890’s)

Question 4

What are the three legitimate sources of Monopoly?

Answer 4

• Sole Ownership of the Input
• Government Action/Regulation
• Natural Monopoly

Question 5

If a single firm controls all of an input needed to produce a good then they will be a monopoly

Answer 5

Sole Ownership of Input

Question 6

Legal right to a monopoly for a certain period of time?

Answer 6

Gov’t Action/Regulation

Question 7

Occurs when the demand curve line in a market intersects the Average total cost curve and long run average cost curve in economies of scale ?

Answer 7

Natural Monopoly

Question 8

• 3% on deposits
• 6% on loans
• golf by 3 oclock

Answer 8

3-6-3 Days of Banking

Question 9

Permitting a natural monopoly to exist but using a price ceiling to regulate them ?

Answer 9

Remedy

Question 10

Agreement amongst firms to collectively behave as a monopolist ?

Answer 10

Collusion

Question 11

Merging with competitors for purposes of not competing with them ?

Answer 11

Illegitimate monopoly sources

Question 12

Demand function expressed Quantity Demanded as a function of Price

Answer 12

Inverse Demand and Monopolists Revenue Function

Question 13

Inverse Demand Function (D -1) expresses given linear demand through what formula ?

Answer 13

Qd = a - bP or

bP +Qd = a

Question 14

Formula for Inverse Demand function Price is ?

Answer 14

D -1 : P= (a - Qd/ b)

Question 15

In a competitive market price is Pe - price the firm receives does not depend on ?

Answer 15

Choice of (q)

Question 16

A monopolist is a __________ not a price taker ?

Answer 16

Price Setter

Question 17

Monopolists Price formula is ?

Answer 17

P(q) = (a/b) - (1/b) x(q)

Question 18

Monopolists Revenue Function is ?

Answer 18

R(q) = P(q) x (q)

Question 19

The relative change in the firms revenue at (q) units if the firm were to produce and sell a small additional amount of the goods?

Answer 19

Marginal Revenue at (q) units

Question 20

Marginal Revenue function where (q) changes?

Answer 20

MR (q) = R(q+change(q)) - R(q) / change (q)

Question 21

The objective of any firm is to choose (q) to ?

Answer 21

Maximize Profits

Question 22

Relative change in profit that the firm would receive from producing and selling a small additional amount of (q)?

Answer 22

Marginal Profit (maximized at q units)

Question 23

At (q=q^) if Marginal Revenue is GREATER that Marginal Cost then ?

Answer 23

Maximized Profit of (q^) is GREATER than 0 and profit will INCREASE

Question 24

At (q=q^) if Marginal Revenue is LESS that Marginal Cost then ?

Answer 24

Maximized Profit of (q^) is LESS than 0 and profit will Decrease

Question 25

At (q=q^) if Marginal Revenue is EQUAL to Marginal Cost then ?

Answer 25

Maximized Profit of (q^) EQUALS 0 and profit wont change

Question 26

Given our assumptions about firms production a quantity known as (q*) will exist such that ?

Answer 26

MR(q) > MC(q) in all quantities less than (q*)

Question 27

Profit Maximization increasing in quantity means ?

Answer 27

MR(q) = MC(q) at quantity equalling (q*)

Question 28

Profit Maximization is constant in quantity which means ?

Answer 28

MR(q) > MC(q) at quantity less than (q*)

Question 29

Profit Maximization is decreasing in quantity which means ?

Answer 29

MR(q) < MC(q) at quantity more than (q*)

Question 30

Any profit maximizing firm will choose to produce and sell the amount of the good where marginal revenue equals marginal cost

Answer 30

Rational actors make decisions at the margin (using marginal analyses)

Question 31

In a competitive market the price the firm receives is Pe and does not depend on?

Answer 31

The firms Choice of (q) | R(q) = Pe X (q) MR(q) = Pe

Question 32

(q*) for a firm in a competitive market is the quantity where their Marginal Cost equals ?

Answer 32

The Market Price

Question 33

Social Welfare that could be generated but isn't is ?

Answer 33

Deadweight Loss

Question 34

At (q*) how do you find the marginal Revenue ?

Answer 34

MR(q*) = (a/b) - (2/b) X(q)

Question 35

At (q*) how do you use Marginal revenue to find the (q*)?

Answer 35

Set Marginal Revenue equal to Marginal Cost | MR(q) = MC(q) gives you (q*)

Question 36

At (q*) how do you find the monopolist price ?

Answer 36

Set the Quantity Demanded function to Price and plug in the (q*)

Question 37

At (q*) how do you find the Revenue ?

Answer 37

Multiply the Monopolist Price by the (q*) | (MP)X(q*) = Revenue

Question 38

At (q*) how do you find the Total Cost ?

Answer 38

Plug the (q*) into the Total Cost function

Question 39

At (q*) how do you find the Profit Maximization?

Answer 39

``` Plug the (q*) into the Profit Max function Profit Max (q*) = R(q*) - TC(q*) ```

Question 40

Learner Index formula

Answer 40

(P - MC) / MC

Question 41

Charging different consumers different prices for the same good in a way that is not related to the cost of serving different customers but rather on willingness to pay?

Answer 41

1st Degree Price Discrimination

Question 42

The per unit price a consumer pays is based on total amount bought, quantity discounts?

Answer 42

2nd Degree Price Discrimination

Question 43

1st Degree Price Discrimination examples and 2nd Degree Price Discrimination examples are?

Answer 43

1st - Financial Aid, Senior/Child Discounts on tickets | 2nd - Buying a single drink compared to a 6 pack