All Flashcards
What are the key differences between a monopoly and perfect competition?
Monopolies are price makers with high barriers to entry, while perfectly competitive firms are price takers with free entry and exit.
How do monopolies and perfectly competitive firms differ in terms of allocative efficiency?
Perfectly competitive firms are allocatively efficient (P=MC), while monopolies are not.
How do monopolies and perfectly competitive firms differ in terms of productive efficiency?
Perfectly competitive firms achieve productive efficiency in the long run (P = min ATC), while monopolies do not.
What are the differences between a monopoly and an oligopoly?
A monopoly has one firm, while an oligopoly has a few dominant firms.
How does the demand curve faced by a monopoly differ from that faced by a perfectly competitive firm?
A monopoly faces the market demand curve, which is downward sloping, while a perfectly competitive firm faces a perfectly elastic demand curve.
How do monopolies and perfectly competitive firms differ in their ability to earn long-run economic profits?
Monopolies can earn long-run economic profits due to barriers to entry, while perfectly competitive firms earn zero economic profit in the long run.
What are the differences between a single-price monopoly and a price-discriminating monopoly?
A single-price monopoly charges the same price to all customers, while a price-discriminating monopoly charges different prices to different customers.
How does the marginal revenue curve differ for a monopoly compared to a perfectly competitive firm?
For a monopoly, MR < P, while for a perfectly competitive firm, MR = P.
What are the differences between a natural monopoly and a legal monopoly?
A natural monopoly arises due to economies of scale, while a legal monopoly is created by government patents or copyrights.
How does consumer surplus differ under monopoly versus perfect competition?
Consumer surplus is lower under monopoly due to higher prices and lower output.
On a monopoly graph, where is the profit-maximizing quantity?
Where MR = MC.
On a monopoly graph, how do you find the profit-maximizing price?
Go up from the MR=MC point to the demand curve.
How is profit calculated on a monopoly graph?
(Price - ATC) x Quantity.
How is loss calculated on a monopoly graph?
(ATC - Price) x Quantity.
On a monopoly graph, what does the area between the demand curve and MC curve represent beyond the profit-maximizing quantity?
Deadweight loss.
On a monopoly graph, where is the socially optimal point?
Where D = MC.
On a monopoly graph, where is the fair-return point?
Where P = ATC.
On a monopoly graph, where is total revenue maximized?
Where MR = 0.
On a monopoly graph, how do you identify the elastic region of the demand curve?
The part of the demand curve above the point where MR = 0.
On a monopoly graph, what does the area between ATC and price at the profit-maximizing quantity represent?
Profit or loss, depending on which curve is higher.
What is a monopoly?
One company controls an entire market.
Define a natural monopoly.
One firm can produce goods at the lowest cost, making it tough for others to compete.
What are barriers to entry?
Obstacles that prevent new firms from entering a market.
Define 'price maker'.
A firm that has the power to set the market price.
What is allocative efficiency?
Resources are allocated to their most valued uses; P=MC.
What is productive efficiency?
Producing goods at the lowest possible cost; P = min ATC.
Define deadweight loss (DWL).
The loss of economic efficiency when the equilibrium for a good or service is not Pareto optimal.
What is a fair-return price?
Price where P = ATC, resulting in normal profit.
Define socially optimal quantity.
Quantity where D = MC, achieving allocative efficiency.
What is non-price competition?
Firms compete using methods other than price, like advertising or product quality.