Monopoly/oligopoly/perf Comp.

1. What is the formula for total revenue (TR)?

Total Revenue = Price / Quantity

Total Revenue = Price + Quantity

Total Revenue = Price x QuantityTR = P x q

Total Revenue = Price - Quantity

Total Revenue is calculated by multiplying the price per unit by the quantity of units sold. This formula represents the total income generated by sales.

Explanation

Total Revenue is calculated by multiplying the price per unit by the quantity of units sold. This formula represents the total income generated by sales.

2. What is the formula for average revenue (AR)?

Average Revenue = Total Cost * Quantity

Average Revenue = total revenue/quantityAR = TR/q

Average Revenue = Total Profit - Expenses

Average Revenue = Marginal Revenue / Quantity

Average Revenue is calculated by dividing the total revenue by the quantity of output sold. This formula gives a measure of the revenue generated per unit of output sold.

Explanation

Average Revenue is calculated by dividing the total revenue by the quantity of output sold. This formula gives a measure of the revenue generated per unit of output sold.

3. What is the formula for marginal revenue (MR)?

Marginal Revenue = Average revenue per unit (AR)

Marginal Revenue = The change in quantity/change in total revenue (MR = ^q/^TR)

Marginal Revenue = The change in total revenue/change in quantity.MR = ^TR/^q

Marginal Revenue = Total revenue times quantity (MR = TR * q)

Marginal Revenue is the additional revenue that a company receives from selling one more unit of a good or service. It is calculated by dividing the change in total revenue by the change in quantity sold, which gives insight into the impact of producing and selling additional units on revenue.

Explanation

Marginal Revenue is the additional revenue that a company receives from selling one more unit of a good or service. It is calculated by dividing the change in total revenue by the change in quantity sold, which gives insight into the impact of producing and selling additional units on revenue.

4. In the long-run what characteristic of Perfect Competition allows it to operate at the lowest ATC?

Because perfect competition allows for collusion among firms to set higher prices.

Because perfect competition leads to monopolistic behavior and pricing.

Because perfect competition results in the highest barriers to entry.

Because in perfect competitive markets marginal revenue, average revenue, and price are all equal: P = MR = AR

In perfect competition, the equalization of price, marginal revenue, and average revenue allows for firms to operate at the lowest average total cost (ATC) due to the absence of additional markup in pricing. This characteristic ensures efficiency and competitiveness in the market.

Explanation

In perfect competition, the equalization of price, marginal revenue, and average revenue allows for firms to operate at the lowest average total cost (ATC) due to the absence of additional markup in pricing. This characteristic ensures efficiency and competitiveness in the market.

5. What are the 4 characteristics of a monopoly?

1. multiple sellers and many buyers, 2. generic product, 3. easy entry into the market, 4. limited information

1.single seller and many buyers 2.unique product 3.entry is impossible 4.perfect information

A monopoly is characterized by a single seller, a unique product, barriers to entry, and perfect information.

Explanation

A monopoly is characterized by a single seller, a unique product, barriers to entry, and perfect information.

6. What are the 3 types of monopolies?

1.closed monopoly 2.natural monopoly3.open monopoly

1. political monopoly

3. artificial monopoly

2. technological monopoly

Monopolies can be categorized into closed, natural, and open types based on different factors such as market control, entry barriers, and competition levels.

Explanation

Monopolies can be categorized into closed, natural, and open types based on different factors such as market control, entry barriers, and competition levels.

7. What is the deadweight loss associated with a monopoly?

Deadweight loss is the loss caused by government intervention in the market.

Deadweight loss is the loss resulting from a decrease in consumer purchasing power due to inflation.

Deadweight loss is the loss experienced when a firm operates at a loss.

Deadweight loss specifically refers to the loss of economic efficiency that is not being recouped elsewhere in the market. In the case of a monopoly, deadweight loss occurs because the firm restricts output to drive up prices, resulting in a loss of potential gains from trade.

Explanation

Deadweight loss specifically refers to the loss of economic efficiency that is not being recouped elsewhere in the market. In the case of a monopoly, deadweight loss occurs because the firm restricts output to drive up prices, resulting in a loss of potential gains from trade.

8. What is Monopoly inefficiency?

A situation where there is perfect competition in the market

When a monopolistic market benefits consumers by providing high-quality goods at low prices

The presence of numerous firms in a market leading to price wars and bankruptcy

Monopoly inefficiency refers to a situation where a lack of competition in a monopolistic market causes a misallocation of resources, higher prices, lower quantity of goods being produced, reduced consumer surplus, and potentially negative impacts on innovation and economic growth.

Explanation

Monopoly inefficiency refers to a situation where a lack of competition in a monopolistic market causes a misallocation of resources, higher prices, lower quantity of goods being produced, reduced consumer surplus, and potentially negative impacts on innovation and economic growth.

9. What is the standard economic case against monopolies?

Monopolies lead to higher levels of competition and innovation in the market.

Monopolies do not affect economic welfare or efficiency in any way.

The standard economic case against monopolies is that with the same cost strucutre a supplier will produce a lower output and charge a higher price than a competitive industry. This leads to a net loss of economic welfare and efficiency and price is driven above marginal cost leading to allocative inefficiency.

Monopolies benefit consumers by providing unique products at lower prices.

Monopolies are generally harmful to customers and the economy, as they have the power to set prices at inefficient levels due to lack of competition.

Explanation

Monopolies are generally harmful to customers and the economy, as they have the power to set prices at inefficient levels due to lack of competition.

10. What is monopolistic competition?

A market structure with a few firms controlling the majority of the market share.

A market structure with only one firm controlling the entire market.

Many firms each making a slightly different product. Each firm's output level is small relative to the total.

A market structure where products are identical and no individual firm has control over prices.

Monopolistic competition refers to a market structure where many firms produce slightly different products. Each firm has a small share of the market and products are differentiated to some extent, leading to some control over pricing by individual firms.

Explanation

Monopolistic competition refers to a market structure where many firms produce slightly different products. Each firm has a small share of the market and products are differentiated to some extent, leading to some control over pricing by individual firms.

11. What is characteristic of perfect competition?

Each firm producing identical products with no control over the price.

Existence of entry barriers that restrict new firms from entering the market.

Few large firms dominating the market, each with significant market power.

Many firms, all making the same product. Each firm's output level is very small relative to the total output level.

Each firm producing differentiated products with some control over the price.

Perfect competition is characterized by many firms producing the same product, with each firm having a negligible impact on the market price. This results in a situation where no single firm has market power to influence the price.

Explanation

Perfect competition is characterized by many firms producing the same product, with each firm having a negligible impact on the market price. This results in a situation where no single firm has market power to influence the price.

12. What are the assumptions of perfect competition?

There is one dominant seller controlling the market. Unique product. Limited entry and exit opportunities. Asymmetric information.

There is collaboration among sellers to set prices. Diverse product offerings. Barriers to entry and exit. Limited information sharing.

There are many buyers and sellers and each firm is a price-taker.Homogeneous product.Freedom of entry and exit.Perfect information.

There are few buyers and sellers with monopolistic power. Differentiated products. Restricted entry and exit. Imperfect information.

Perfect competition is characterized by a large number of buyers and sellers where each firm is a price-taker due to the homogeneous product, ease of entry and exit, and perfect information available to all participants.

Explanation

Perfect competition is characterized by a large number of buyers and sellers where each firm is a price-taker due to the homogeneous product, ease of entry and exit, and perfect information available to all participants.

13. What are the main strategies that governments typically use to handle monopolies?

1. Leave it alone.2. Break it up.3. Regulate it by setting price/profit.

4. Support it financially. 5. Ignore it completely. 6. Encourage its growth.

14. Why would the government leave a monopoly alone?

Because the monopoly may be temporary such as patents. It may be a large economy of scale and/or network advantage. Or there may be little potential for abuse.

Because the government lacks the authority to intervene in monopolistic practices.

Because the government supports monopolies to stifle competition and control the market.

Because the government is unaware of the negative effects monopolies can have on consumers.

Governments may choose to leave monopolies alone under specific circumstances such as those mentioned in the correct answer, rather than endorsing monopolistic behavior or being unaware of its consequences.

Explanation

Governments may choose to leave monopolies alone under specific circumstances such as those mentioned in the correct answer, rather than endorsing monopolistic behavior or being unaware of its consequences.

15. Why would the government break up a monopoly?

It may be a non temporary situation. There are no large economies of scale and/or network advantage and people with pay higher prices for less quantity. When we don't get any benefit from the monopoly.

Because monopolies are always bad for consumers.

To support the growth and success of the monopolistic company.

To restrict competition and innovation in the market.

The government may break up a monopoly if it is not a temporary situation and if there are no large economies of scale or network advantage, leading to higher prices for consumers. The goal is to ensure competition, lower prices, and increase innovation in the market.

Explanation

The government may break up a monopoly if it is not a temporary situation and if there are no large economies of scale or network advantage, leading to higher prices for consumers. The goal is to ensure competition, lower prices, and increase innovation in the market.

16. Why would the government regulate a monopoly?

Government has no role in regulating monopolies as they naturally balance themselves out.

To support and encourage monopoly power in the market.

Because monopolies always lead to lower prices for consumers.

When it is a large economy of scale and/or network advantage but too much potential for abuse. (Demand is inelastic). This is usually done with electricity.

Government regulation of monopolies is necessary to prevent abuse of market power and ensure fair competition for the benefit of consumers.

Explanation

Government regulation of monopolies is necessary to prevent abuse of market power and ensure fair competition for the benefit of consumers.

17. What are the effects of government regulating prices too high for a monopoly?

It creates hardship for customers and discourages local business from entering the town. When the government sets prices too high it can hurt the local economy and tax base at the local government level.

It leads to increased consumer choice and promotes economic growth.

It stimulates competition and encourages fair pricing in the market.

It has no impact on the local economy or businesses in the town.

When government regulates prices too high for a monopoly, it restricts competition, limits consumer choice, and hinders economic growth by discouraging new businesses from entering the market. This can ultimately lead to negative consequences for the local economy and tax base.

Explanation

When government regulates prices too high for a monopoly, it restricts competition, limits consumer choice, and hinders economic growth by discouraging new businesses from entering the market. This can ultimately lead to negative consequences for the local economy and tax base.

18. What are the effects of government regulating prices too low for a monopoly?

It results in the company having to cut quality, service and/or maintenance. This also leads to investment cuts.

It promotes healthy competition in the market.

It increases the monopoly's profits and benefits consumers.

It encourages innovation and efficiency within the monopoly.

Government regulation of prices too low for a monopoly can have detrimental effects on the quality, service, and maintenance provided by the company, as well as on its investment decisions. This can ultimately harm consumers and the overall market dynamics.

Explanation

Government regulation of prices too low for a monopoly can have detrimental effects on the quality, service, and maintenance provided by the company, as well as on its investment decisions. This can ultimately harm consumers and the overall market dynamics.

19. What is marginal cost pricing?

Pricing set where P = MR < MC.

Pricing set where P = MR = MC.Costs:The company is losing money and has to cut maintenance, service and/or quality to make up for the losses. Benefits:The consumers get a lower price.

Pricing set where P > MR > MC.

Pricing set where P < MR < MC.

Marginal cost pricing is when the price is set equal to both marginal revenue and marginal cost to maximize profits.

Explanation

Marginal cost pricing is when the price is set equal to both marginal revenue and marginal cost to maximize profits.

20. What is average cost pricing?

Average cost pricing is where P < AC.

Average cost pricing is where P = AC.Costs:Customers pay a higher price but you see more satisfaction with average costs pricing. Benefits. Average costs pricing gives the company an incentive to do better and may be able to lower prices. The company also makes a profit.

Average cost pricing is where P = MC.

Average cost pricing is where P > AC.

Average cost pricing is where the price equals the average cost, leading to certain costs and benefits as mentioned in the correct answer.

Explanation

Average cost pricing is where the price equals the average cost, leading to certain costs and benefits as mentioned in the correct answer.

21. What is the capture theory?

A theory about capturing electromagnetic waves.

The idea that all information should be stored in a database.

When a picture is taken of a wild animal.

When the regulating body is influenced by the group it regulates.

The capture theory refers to a situation where the regulating body responsible for oversight or regulation is unduly influenced or controlled by the very group or industry it is supposed to regulate. This can lead to conflicts of interest, regulatory capture, and potentially harmful outcomes for consumers or the general public.

Explanation

The capture theory refers to a situation where the regulating body responsible for oversight or regulation is unduly influenced or controlled by the very group or industry it is supposed to regulate. This can lead to conflicts of interest, regulatory capture, and potentially harmful outcomes for consumers or the general public.

22. Explain both ways that a regulatory board can be dominated.

By a regulatory board that is fully independent and not influenced by political or industry pressures.

By a regulatory board where members are appointed based on their expertise and qualifications rather than political connections.

By a public domainted regulatory board when you have the regulatory board elected by appointment or are in an area that has a lot of political influence.Or by a industry dominated regulatory board where one or a few large employers in the area have a larger political influence than the regulating body. Most common when there are many layers of appointment between voter and regulating board.

By a regulatory board that is elected directly by the public without any external influence.

23. What is the goal of regulating monopolies?

To eliminate competition in the market

The goal of the regulating body is to find the socially optimal point of production for the economy.

To maximize profit for the monopolies at the expense of consumers

To ensure monopolies have complete control over markets

Regulating monopolies aims to strike a balance between allowing them to operate efficiently while also ensuring fair competition and consumer welfare.

Explanation

Regulating monopolies aims to strike a balance between allowing them to operate efficiently while also ensuring fair competition and consumer welfare.

24. What is a pure monopoly?

Having multiple sellers of a unique product with no close substitutes.

When there is one seller of a unique product with no close substitues.

When there is one seller of a common product with many substitutes.

When there are no sellers of a product in the market.

A pure monopoly occurs when there is only one seller of a unique product with no close substitutes, giving the seller significant control over the market.

Explanation

A pure monopoly occurs when there is only one seller of a unique product with no close substitutes, giving the seller significant control over the market.

25. What is a virtual monopoly and how do we analyze virtual monopolies?

A market where competition is high and prices are determined by supply and demand.

A market where the seller has less than 50% of the market share.

A monopoly where the seller may not have 100% of the market but has a significant amount such as 80-99% of the market. Since virtual monopolies make decisions just as a monopoly would we analyze them as a monopoly.

A market where multiple sellers have equal share.

A virtual monopoly occurs when a single seller has a significant market share, allowing them to make decisions similar to a monopoly. This differs from a market with equal share, low market share, or high competition.

Explanation

A virtual monopoly occurs when a single seller has a significant market share, allowing them to make decisions similar to a monopoly. This differs from a market with equal share, low market share, or high competition.

26. What are the 2 types of barriers to entry?

Natural barriers and Artifical barriers.

Social barriers and Cultural barriers

Physical barriers and Emotional barriers

Financial barriers and Intellectual barriers

Barriers to entry in economics refer to the factors that make it difficult for new firms to enter a market. Natural barriers are inherent in the market, such as limited resource availability. Artificial barriers are created by existing firms through actions like patents or government regulations.

Explanation

Barriers to entry in economics refer to the factors that make it difficult for new firms to enter a market. Natural barriers are inherent in the market, such as limited resource availability. Artificial barriers are created by existing firms through actions like patents or government regulations.

27. What are artificial barriers?

Artificial barriers are also called legal barriers. These consist of patents, government licenses, network advantage or control of raw materials.

Artificial barriers are barriers created by animals to protect their territories.

Artificial barriers are physical structures that prevent access to certain areas.

Artificial barriers refer to barriers created by nature, such as mountains and oceans.

Artificial barriers in this context refer to obstacles created for competitive advantage in business or trade.

Explanation

Artificial barriers in this context refer to obstacles created for competitive advantage in business or trade.

28. What do artificial barriers cause Price and Quantity to do in a monopolistic competition? How do artificial barriers affect consumers?

Artificial barriers cause prices to fluctuate randomly and quantity to remain constant in monopolistic competition. Consumers may benefit from occasional sales due to artificial barriers.

Artificial barriers cause higher prices and less output than a competitive market. This doesn't always mean that consumers are worse off they can be in the form of patents that stimulate invention.

Artificial barriers can lead to higher prices and less output compared to a competitive market, which can potentially harm consumers depending on the industry and circumstances.

Artificial barriers cause lower prices and higher output than a competitive market. This benefits consumers by increasing affordability and availability of goods.

Artificial barriers have no impact on Price and Quantity in monopolistic competition. Consumers are unaffected by artificial barriers.

In a monopolistic competition, artificial barriers generally result in higher prices and lesser output compared to a truly competitive market. This can impact consumers in various ways depending on factors such as patents, innovation, product differentiation, and market power.

Explanation

In a monopolistic competition, artificial barriers generally result in higher prices and lesser output compared to a truly competitive market. This can impact consumers in various ways depending on factors such as patents, innovation, product differentiation, and market power.

29. What do natural barriers cause Price and Quantity to do?

Natural barriers have no effect on Price and Quantity.

Natural barriers cause Price to increase and Quantity to decrease.

Natural barriers cause Price to decrease and Quantity to increase.

Natural barriers cause Unknown Price and Unknown Quantity.

Natural barriers such as geographical features or government regulations can impact the supply chain of goods, leading to uncertainty in both price and quantity in the market.

Explanation

Natural barriers such as geographical features or government regulations can impact the supply chain of goods, leading to uncertainty in both price and quantity in the market.

30. What is it called when a monopoly exists due to artificial barriers?

Non-natural monopoly

Barrier monopoly

Artificial monopoly

Fabricated monopoly

A non-natural monopoly is when a monopoly exists due to artificial barriers created by a company or government intervention.

Explanation

A non-natural monopoly is when a monopoly exists due to artificial barriers created by a company or government intervention.