All Flashcards
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 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.
How do high barriers to entry affect long-run profits for a monopoly?
High barriers to entry allow monopolies to sustain long-run profits by preventing competition.
How does a monopoly's output decision affect the market price?
A monopoly's decision to decrease output increases the market price, as it controls the supply.
How does regulating a monopoly with a price ceiling affect its output and price?
A price ceiling can force a monopoly to increase output and lower its price, moving towards allocative efficiency.
How does a natural monopoly benefit society?
It can lead to lower prices and productive efficiency due to economies of scale.
How does a monopoly's profit-maximizing output relate to elasticity of demand?
A monopoly will always produce in the elastic region of the demand curve to maximize revenue.
How does a price ceiling at the socially optimal level affect a monopoly?
It forces the monopoly to produce at the allocatively efficient level where P=MC.
How does a price ceiling at the fair-return price affect a monopoly?
It allows the monopoly to earn a normal profit where P=ATC.
How does a monopoly's market power affect consumer surplus?
Monopolies reduce consumer surplus by charging higher prices and producing less output compared to competitive markets.
If a monopoly is experiencing losses, should it continue to produce?
The monopoly should continue to produce as long as P > AVC, to minimize losses.
How does advertising affect a monopoly's demand curve?
Advertising can shift the demand curve to the right, increasing both price and quantity.