Flashcards in PHASE 2- Adobe Ch.8: Pure Monopoly Deck (54)
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1
pure monopoly exists when
there is one single seller- no close substititues, firm and industry synonymous, ppl who dont buy product do without it
2
pure monoply is the price ___
maker
3
what does it mean to be the price maker
controls total Q supplied and has considerable conrol over price, confronts usual downward sloping product demand curve, change product price by changing Q product it produces
4
blocked entry
entry baririers that prohoibit frims fro entering industry
5
four prominent barriers to entry / blocked entry
economies of scale, patents/liscense, ownership/control of essential resources, pricing and other stategic barriers to entry
6
economies of scale
declining total average cost - when economies of scale are extensive, firm's long run avg cost curve will decline over wide range of output, only a few large firms/or a single firm can achieve low ATC, protects monopoly from competition
7
patents and licenses
gov creates legal barriers to entry through patents and licensing
8
patents
exclusive rigt of inventor to use/allow another to use his/her invention provides inventor with monopoly position for life of patent
9
licensing
at national level- federal communications commission licenses only so many radio/tv stations in each geographic area -ie limiting taxicabs allowed in large cities thru license
10
control of essential inputs
if single firm controls an input essential to production of a given product, that firm will have market power
11
near monopoly
single firm has bulk of sales in specific market ie. intel
12
strategic pricing
entry can be blocked by way monopolist - create entry barriers, response to attempts by rivals to enter industry.. slash prices, step up advertising
13
pure monopoly has
strong barrierse to entry effecivly blocking all potential compeition
14
somewhat weaker barrierse permit
oligopoly - market structure dominated by a few firms
15
monoplisitic competition is
enter large number of firms
16
crucial difference between pure monoplist and a purely competitive seller lies on which side of the market
demand side
17
purely competitive seller faces
perfect elastic demand at price determined by market s/d, each additional unit sold adds amount of constant product price to firms TR; MR for competitive seller is constant, qual to product price P = MR
18
pure monopoly in the market
demand curve is market demand curve, downarwad sloping demand curve- increase sales only by charging lower price, MR less than price, MR not equal to output price, Gain minus Loss equals MR
19
why is MR less than Price
bc lower price of extra unit also applie sto all prior units, each additioal unit of output sold increases TR by amount equal to its ow price less than the sum of the price cuts that apply to all prior units of output
20
MR is ALWAYS ____ price
less than
21
MR can be
negative, add revenue from selling one more unit of output isnt big enought o cover loss in revenue due to price reduction for all rprevious units
22
monopolist's MR curve has ____ slope of straight line demand curve
two times steeper
23
as output increases, firm's additional revenue ____
drops two times as fast as does price firm can charge consumers
24
for society where is MB, and where is MB for firm monopoly
D = MB society
MR = MB firm
25
in a purely competitive market, where is productive efficiency? allocative efficiency? is it efficient
prod efficiency- P =minATC
allocative effic- P=MC
yes efficient, sum of productive and consumer surplus made as large as possible
26
pure monopoly, where is optimization, efficient or not?
MR = MC rule --> monoplogy maximize profit by producng lower ouptu and charging higher price, not efficient - output is less than required for ahieving min ATC and bc monoplist price exceeds MC
27
monopoly - profit maximizing rule, P and MR relationship, P and MC relationship, deadweight loss?
MR = MC rule
P greater than MR - reality - D curve lies above
P greater than MC - effect
deadweight loss effect
28
perfect competition - profit maximizing rule, P and MR relationship, P and MC relationship, deadweight loss?
MR = MC rule
P = MR reality MR. D.AR.P
P = MC effect
no deadweight oss effect
29
four complications leading to cost differences
economies of scale, x inneficinecy, rent seeking expenditure, technological avance/advantage
30
