Monopoly

Question 1

monopoly
# of sellers?: 
standard or differentiated products?:
influence over price?:
Barriers to entry?:
any nonprice competition?

Answer 1

• single seller (one firm controls vast majority of a market)
• unique good with no close substitutes
• price maker
• high barriers to entry
• monopolies still advertise in an effort to increase demand

Question 2

monopoly
# of sellers?: 
standard or differentiated products?:
influence over price?:
Barriers to entry?:
any nonprice competition?

Answer 2

• single seller (one firm controls vast majority of a market)
• unique good with no close substitutes
• price maker
• high barriers to entry
• monopolies still advertise in an effort to increase demand

Question 3

True or false?

• all monopolies make a profit?
• they are efficient
• they are bad for economy
• they are illegal
• they charge highest possible price
• government never prevents them

Answer 3

ALL FALSE

Question 4

what are the four barriers to entry in monopolies?

Answer 4

• geography
• government is the barrier to entry
• technology or common use is the barrier (ex: kleenex)
• Mass production and low costs (electric companies)

Question 5

what is a natural monopoly?

Answer 5

only one firm produces everything because they can produce at the lowest cost

Question 6

all other firms other than perfect competition have a _____ demand curve

Answer 6

downward sloping

**which means to sell more a firm must lower its price

Question 7

is it MRDARP or MR and DARP?

Answer 7

it is MR and DARP

Question 8

now MR is to price (pick one)

Question 9

operate in (inelastic, unit elastic, or elastic region)?

Answer 9

elastic region

Question 10

why are monopolies inefficient?

Answer 10

1. charge higher price
2. dont produce enough
3. produce at higher costs
4. have little incentive to innovate

Question 11

True or false?

• all monopolies make a profit?
• they are efficient
• they are bad for economy
• they are illegal
• they charge highest possible price
• government never prevents them

Answer 11

ALL FALSE

Question 12

what are the four barriers to entry in monopolies?

Answer 12

• geography
• government is the barrier to entry
• technology or common use is the barrier (ex: kleenex)
• Mass production and low costs (electric companies)

Question 13

what is a natural monopoly?

Answer 13

only one firm produces everything because they can produce at the lowest cost

Question 14

all other firms other than perfect competition have a _____ demand curve

Answer 14

downward sloping

**which means to sell more a firm must lower its price

Question 15

is it MRDARP or MR and DARP?

Answer 15

it is MR and DARP

Question 16

now MR is to price (pick one)

Question 17

operate in (inelastic, unit elastic, or elastic region)?

Answer 17

elastic region

Question 18

why are monopolies inefficient?

Answer 18

1. charge higher price
2. dont produce enough
3. produce at higher costs
4. have little incentive to innovate

Question 19

what are the three types of price discrimination?

Answer 19

• charge each customer max willingness to pay
• charge 1 price for first unit and a lower price for subsequent units
• charge different customers different prices

Question 20

what does perfect price discrimination do to consumer surplus?

Answer 20

now we have 0

Question 21

what are some policy options to stop price discrimination?

Answer 21

• use antitrust laws
• regulate price
• ignore