CH16 Monopoly

What is the best definition of 'monopoly'?

• a firm that is the sole seller of a product without close substitutes
• statutes aimed at curbing monopoly power
• the business practice of selling the same good at different prices to different customers
• the added value created when two firms merge, due to cost reductions or revenue enhancements

What is the best definition of 'barriers to entry'?

• obstacles that make it difficult or impossible for new businesses to enter a specific market or industry
• a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms
• the business practice of selling the same good at different prices to different customers
• the added value created when two firms merge, due to cost reductions or revenue enhancements

What is the best definition of 'natural monopoly'?

• a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms
• the added value created when two firms merge, due to cost reductions or revenue enhancements
• statutes aimed at curbing monopoly power
• a firm that is the sole seller of a product without close substitutes

What is the best definition of 'price discrimination'?

• the business practice of selling the same good at different prices to different customers
• the added value created when two firms merge, due to cost reductions or revenue enhancements
• obstacles that make it difficult or impossible for new businesses to enter a specific market or industry
• a firm that is the sole seller of a product without close substitutes

What is the best definition of 'antitrust laws'?

• statutes aimed at curbing monopoly power
• the business practice of selling the same good at different prices to different customers
• a firm that is the sole seller of a product without close substitutes
• a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms

What is the best definition of 'synergy'?

• the added value created when two firms merge, due to cost reductions or revenue enhancements
• statutes aimed at curbing monopoly power
• the business practice of selling the same good at different prices to different customers
• a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms

Some government grants of monopoly power may be desirable if they

• provide incentives for invention and artistic creation.
• curtail the adverse effects of cut-throat competition.
• make industries more profitable.
• save consumers from having to choose among alternative suppliers.

A firm is a natural monopoly if it exhibits [ ] as its output increases.

• decreasing average total cost
• increasing total revenue
• increasing marginal cost
• decreasing marginal revenue

For a profit-maximizing monopoly that charges a single price, what is the relationship between price P, marginal revenue MR, and marginal cost MC?

• P > MR and MR = MC.
• P = MR and MR = MC.
• P = MR and MR > MC.
• P > MR and MR > MC.

If a monopoly’s fixed costs increase, its price will [ ], and its profit will [ ].

• stay the same; decrease
• increase; decrease
• decrease; increase
• increase; stay the same