Podcast
Questions and Answers
A firm with monopoly power will always charge a price equal to its marginal cost.
A firm with monopoly power will always charge a price equal to its marginal cost.
False
The Lerner Index of Monopoly Power is calculated as the difference between price and marginal cost divided by price.
The Lerner Index of Monopoly Power is calculated as the difference between price and marginal cost divided by price.
False
Measuring monopoly power only involves qualitative terms.
Measuring monopoly power only involves qualitative terms.
False
The Lerner Index of Monopoly Power can be expressed in terms of the elasticity of demand facing the firm.
The Lerner Index of Monopoly Power can be expressed in terms of the elasticity of demand facing the firm.
Signup and view all the answers
A monopolist might supply several different quantities at the same price.
A monopolist might supply several different quantities at the same price.
Signup and view all the answers
In a monopolistic market, there is a one-to-one relationship between price and quantity produced.
In a monopolistic market, there is a one-to-one relationship between price and quantity produced.
Signup and view all the answers
If the demand curve shifts in a monopoly market, the profit-maximizing output will always change.
If the demand curve shifts in a monopoly market, the profit-maximizing output will always change.
Signup and view all the answers
When a tax of $t$ per unit is levied on a monopolist, the firm's effective marginal cost increases by $t$.
When a tax of $t$ per unit is levied on a monopolist, the firm's effective marginal cost increases by $t$.
Signup and view all the answers
In a monopolistic market, if the demand becomes more elastic, the price will always decrease.
In a monopolistic market, if the demand becomes more elastic, the price will always decrease.
Signup and view all the answers
A monopolist can supply the same quantity at different prices.
A monopolist can supply the same quantity at different prices.
Signup and view all the answers
If a firm's demand is elastic, the markup will be small and the firm will have little monopoly power.
If a firm's demand is elastic, the markup will be small and the firm will have little monopoly power.
Signup and view all the answers
A single supermarket can raise its prices significantly without losing customers due to the small elasticity of market demand for food.
A single supermarket can raise its prices significantly without losing customers due to the small elasticity of market demand for food.
Signup and view all the answers
Small convenience stores typically charge lower prices than supermarkets due to their less price-sensitive customers.
Small convenience stores typically charge lower prices than supermarkets due to their less price-sensitive customers.
Signup and view all the answers
In a monopsonistic market, the monopsonist purchases quantity Q*m where marginal expenditure and marginal value intersect.
In a monopsonistic market, the monopsonist purchases quantity Q*m where marginal expenditure and marginal value intersect.
Signup and view all the answers
In a competitive market, price and quantity are both lower compared to a monopsonistic market.
In a competitive market, price and quantity are both lower compared to a monopsonistic market.
Signup and view all the answers
In a monopoly, average revenue exceeds marginal revenue, leading to a situation where price exceeds marginal cost.
In a monopoly, average revenue exceeds marginal revenue, leading to a situation where price exceeds marginal cost.
Signup and view all the answers
A monopsonist purchases up to the point where marginal expenditure intersects average expenditure.
A monopsonist purchases up to the point where marginal expenditure intersects average expenditure.
Signup and view all the answers
Monopsony power depends on the elasticity of demand.
Monopsony power depends on the elasticity of demand.
Signup and view all the answers
When supply is inelastic in a monopsonistic market, the price paid by the monopsonist is close to what it would be in a competitive market.
When supply is inelastic in a monopsonistic market, the price paid by the monopsonist is close to what it would be in a competitive market.
Signup and view all the answers
Patent laws protect the monopoly positions of firms that developed unique innovations.
Patent laws protect the monopoly positions of firms that developed unique innovations.
Signup and view all the answers
Predatory pricing is a practice of pricing to drive future competitors out of business and to discourage new entrants in a market.
Predatory pricing is a practice of pricing to drive future competitors out of business and to discourage new entrants in a market.
Signup and view all the answers
