Term
What are the characteristics of a Pure Monopoly?
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Definition
The firm is the industry, in other words there is a single seller.
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The good has no close substitutes
therefore there is no promotion for sales aka competitive advertising
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A monopolist is a price maker/ price seeker/ price searcher.
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Entry Barriers Exist
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Term
How many sellers are in a Pure Monopoly?
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Definition
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Term
Are there any close substitutes in a Monopoly?
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Definition
No, there are no close substitutes in a Monopoly
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Term
Are there competitive sales based promotion or general public relations promotion in a Pure Monopoly?
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Definition
General Public Relations Promotion
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Term
What is a Price Maker?
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Definition
One with such power over the market, that they have full control, to actively make its own price in order to maximize its economic profit.
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Term
Is a Monopolist a Price Maker or a Price Taker?
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Definition
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Term
Do Entry Barriers Exist in Pure Monopoly?
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Definition
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Term
What terms are synonymous with the term Price Maker?
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Definition
Price Seeker or Price Searcher
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Term
What term is the antonym of Price Maker?
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Definition
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Term
What is an example of a Monopoly?
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Definition
DeBeers who produces eighty percent of the world's diamonds.
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Kodak for a time enjoyed a 90% market share in the film production industry
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Term
What industries seem to be the most monopolist?
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Definition
Major Pro Sports Franchises
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Public Utilities
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Term
What are Sources of Barriers to Entry?
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Definition
Economies of Scale: The most efficient size of plant (the minimum efficient scale), is a quite large size of plant from a long run perspective by necessity for efficiency.
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Legal Barriers to Entry
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Ownership of Key Resources
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Term
What is a Natural Monopoly?
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Definition
Economy of Scales is so great that only one firm can afford to produce at minimum efficient scale at the least cost.
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Term
Why is Economies of Scale a Barrier to Entry into the Market of a Pure Monopoly?
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Definition
The most efficient size of plant (the minimum efficient scale), is a quite large size of plant from a long run perspective by necessity for efficiency.
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Term
What is a Patent?
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Definition
A monopoly granted by the government to an inventor of a product or process valid for a varying period of time depending on one's district or country
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Term
Are Patents/Copyrights/Licenses forms of Legal Barriers of Entry?
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Definition
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Term
What do Patents Help?
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Definition
Prevent the Exploitation of Inventors of clever people who wish to not have their ideas be stolen.
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Term
What are Copyrights?
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Definition
Similar to patents, but applied to writers/artists on literary/artistic works.
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Term
What are Licenses?
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Definition
Government Awards that are required for certain economic activities.
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Term
What are Examples of Government License Types?
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Definition
Taxi Driver
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Liquor
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Broadcasting
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School Teaching
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Physician
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Term
What happens if a firm has control over key resources in the product market?
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Definition
They may have monopolies in the product market
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Term
What does any firm have to know, before they can determine the amount of output to produce or price?
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Definition
Information about Demand
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Term
Is a Perfectly Competitive Firm a Price Maker or Price Taker?
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Definition
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Term
What is a Price Taker?
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Definition
One who has no effect on market price, as there are too many sellers.
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Term
Does a Perfectly Competitive Firm have an effect on the market?
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Definition
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Term
What kind of sloping market demand does a Monopoly have?
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Definition
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Term
What are the Implications of a Monopoly?
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Definition
Price is Greater than Marginal Revenue
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Monopolist operate in the elastic portion of demand
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Term
In a Monopoly, what is the relationship between price and Marginal Revenue?
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Definition
Price is Greater than Marginal Revenue
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Term
Total Revenue Divided by Quantity Equals What?
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Definition
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Term
Are Price and Average Revenue Equal?
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Definition
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Term
As price/average revenue falls, what happens to Marginal Revenue?
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Definition
Marginal revenue must fall and lie below average revenue
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Term
Monopolist operate in what portion of demand?
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Definition
The Elastic Portion of Demand
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Term
Where Marginal Revenue equals zero, demand is elastic when referring to a perfect competition or monopoly?
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Definition
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Term
What does Total Revenue Equal?
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Definition
Price Times Quantity
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Term
A falling price, with elastic demand causes what?
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Definition
Total Revenue to Increase, and Marginal Revenue is Positive
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Term
How do you calculate Marginal Revenue?
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Definition
Change in Total Revenue Over Change in Quantity
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Term
When Price decreases, and Quantity increases, in an equal amount, when demand is unit elastic, then what happens to Total Revenue?
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Definition
It does not change
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Term
Marginal Revenue is Equal to Zero When?
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Definition
When Demand is Unit Elastic
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Term
When Price decreases more than the increase of quantity, when demand is inelastic, what happens to Total Revenue and Marginal Revenue?
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Definition
Total Revenue Decreases and Marginal Revenue becomes Negative
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Term
When does any firm maximize profit?
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Definition
When Marginal Costs Equal Marginal Revenue
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Term
Can Marginal Costs Ever Be Negative?
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Definition
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Term
What do Monopolists always want to assure?
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Definition
That when a Monopolist lowers the price of a good, the firm will earn more revenue in the process.
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