Exam 9: Monopoly Markets

In reality, because few markets are perfectly competitive, some loss of economic efficiency occurs in the market for nearly every good or service.

Which one of the following is not a possible barrier to entry high enough to keep competing firms out of a monopoly industry?

-Refer to Figure 9-9. What is the difference between the monopoly output and the perfectly competitive output?

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7. Which of the following statements is true?

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly. Which of the following statements comparing the conditions in the industry under both market structures is true?

For a firm that can effectively price discriminate, who will be charged a lower price?

Which of the following statements about perfect price discrimination is false?

What is a public franchise? Are all public franchises natural monopolies?

-Refer to Figure 9-9. At the profit-maximising quantity, what is the difference between the monopoly's price and the marginal cost of production?

Firms that face downward-sloping demand curves for their output in the product market are called

Refer to Table 9-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay. What is Julie's total revenue and how many hours of service will be purchased?

a. What is the defining characteristic of a natural monopoly? b. Should the government break up a natural monopoly into two or more firms to make the industry more competitive? c. Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers. To achieve this goal, it requires that the natural monopoly set its price equal to marginal cost. Is this a feasible goal? Explain. d. What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?

-Refer to Figure 9-13. Suppose the government regulates this industry in order to remove the inefficiency implied by the behaviour of the profit-maximising owners. If regulators require that the firm produces the economically efficient output level, what is this level and what price will be charged?

What happens to a monopoly's revenue when it sells more units of its product?

If the market for a product begins as perfectly competitive and then becomes a monopoly, there will be a reduction in economic efficiency and a deadweight loss.

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

-Refer to Figure 9-15. What is the economically efficient output level?

The term 'trust' in antitrust refers to a board of trustees that has collusive control over different companies.

-Refer to Figure 9-12. ETSA Power is a natural monopoly because