30 Questions
Which market structure is characterized by a single firm representing the market and facing significant barriers to entry?
Monopoly
Which of the following is a distinguishing characteristic of a monopoly market?
The product offered has no close substitute
What is the condition for a perfectly competitive firm to maximize its return?
MR = MC
What is a possible source of market power for a monopoly?
Government-controlled authorization
What is one example of a near-monopoly dominant firm?
De Beers Consolidated Mines Limited
What is the most common form of monopolistic market power?
Government-controlled authorization
What is the condition for a perfectly competitive firm to maximize its return?
MR = MC
Which of the following is a potential source of market power for monopolies?
All of the above
What is the demand relationship in a monopoly market?
P = a/b - (1/b)QD
What is the marginal revenue curve in a monopoly market if the demand schedule is linear?
Twice as steep as the demand schedule
What is the total revenue equation in a monopoly market?
TR = 800QD − 2QD^2
What is the profit-maximizing level of output in a monopoly market?
QD = 75
What is the marginal cost equation in a monopoly market?
MC = 50 + 6Q
What determines the profit-maximizing level of output in a monopoly market?
Intersection of MC and MR
According to the text, what happens to the industry supply curve in the long run when there is an increase in economic profit?
It shifts to the right, away from the origin of the graph.
In the long run, where does the perfectly competitive firm operate in terms of marginal cost and average cost?
At the point where marginal cost is equal to average cost.
What does it mean for a perfectly competitive firm to earn zero economic profit in the long run?
The firm is breaking even.
What is the relationship between total revenue and price in the long-run equilibrium of a perfectly competitive firm?
Total revenue is equal to price.
What is the long-run marginal cost schedule of a perfectly competitive firm?
The perfectly competitive firm's supply curve.
What is the basic rule of profit maximization for a perfectly competitive firm in long-run equilibrium?
MR = MC
What is the relationship between the perfectly competitive firm's demand schedule and its marginal revenue and average revenue?
They are all equal.
Which of the following methods can be used to solve the profit function in a monopoly market?
All of the above
In a monopoly market, the profit-maximizing quantity of output occurs when Q* is equal to how many units?
75
What is the price per unit in a monopoly market when Q* = 75 units of output?
650
What is the total maximum profit in a monopoly market when Q* = 75 units of output?
8,125
In a monopoly market, where does the price and output combination that maximizes profit occur on the demand curve?
In the elastic portion
What is the relationship between marginal revenue (MR) and price elasticity (EP) in a monopoly market?
MR = P[1 - 1/EP]
If a monopoly firm knows that its marginal cost is constant at 75 and the price elasticity of demand is 1.5, what is the optimal price?
225
In a regulated monopoly, what is the output level and price set by the government regulator?
QR and PR
Why is the competitive solution unfair for a regulated monopoly?
The price does not cover the average cost of production
"Understanding Monopolies: Exploring the Role of Brand Loyalty as a Barrier to Entry" - Test your knowledge on how brand loyalty can create barriers to entry in monopolistic competition, using the example of the renowned Swiss watchmaker Rolex. Learn about the different sources of product differentiation and their impact on monopolies.
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