Term
In a Monopoly, which is greater:
Demand or Marginal Revenue?
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Definition
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Term
Profit is Maximized when Marginal Revenue is what?
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Definition
Equal to Marginal Cost
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Term
When price is greater than average total cost, then Total Revenue is what?
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Definition
Greater than Total Cost
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Term
A monopolist does not charge what?
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Definition
The highest possible price
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Term
What does a monopolist charge?
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Definition
The profit maximizing price
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Term
Are losses possible in the short run, for a monopoly?
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Definition
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Term
What is most likely for long run economic profit of a monopoly?
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Definition
Economic Profit greater than zero
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Term
Why is Economic Profit greater than zero, most likely for a monopoly during the Long Run?
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Definition
Because of the Entry Barriers that hold back competing firms during the Long Run.
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Term
Is there a market supply curve in a monopoly?
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Definition
One does not exist, or is not present, in a monopoly.
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Term
Does a Market Supply Curve exist in a Perfect Competition or a Monopoly?
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Definition
Perfect Competition
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Term
What is a Market Supply Curve?
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Definition
As prices rise, supply rises, generating an upward curve.
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Term
When Price is Greater than Marginal Cost, what is the efficiency of the firm?
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Definition
Allocative Inefficiency
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Term
Is a Monopoly, allocatively efficient, or allocatively inefficient?
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Definition
Allocatively Inefficient
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Term
When a firm is allocatively inefficient, what does society want out of the firm?
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Definition
They value the good more than other goods, and wants the firm, to generate more goods by using more resources.
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Term
When does a firm underallocate resources?
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Definition
When Price does not equal Minimum Average Total Cost
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Term
When a firm underallocates resources, then what is their efficiency?
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Definition
Non-Productive Efficiency
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Term
Do monopolies underallocate their resources?
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Definition
Yes, they are not productively efficient
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Term
If monopolies are not productively efficient, then how are they not run out of business, by more productive firms?
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Definition
Entry Barriers prevent other firms from entering the competition and promoting productive efficiency.
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Term
What Does Rent Seeking Refer To?
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Definition
Effort by monopolists to spend resources solely in the pursuit of monopoly rights and protections granted by the government.
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Term
Monopolists only hire Lawyers, Accountants, and Executives for what purpose?
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Definition
To lobby the government, for the purpose of Rent Seeking
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Term
What is Price Discrimination?
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Definition
The practice (by sellers/firms) of charging one buyer (or group of buyers) a different price than another buyer (or group) for the same good, when the price difference is not justified by differences in costs.
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Term
What are the conditions for a Price Discrimination scheme to work?
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Definition
The seller must have some power to control output and price
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Seller must be able to segregate buyers by their willingness or ability to pay
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Buyer segregation is final and binding
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Resale or Arbitrage is not possible
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Term
What is Arbitrage?
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Definition
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Term
When price is higher, what is the demand elasticity?
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Definition
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Term
Can you describe the Demand and Fate of a Non-Coupon Clipper?
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Definition
Relatively inelastic demand, who values time more highly, will identify fewer substitutes, and will get the higher price.
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Term
Can you describe the Demand and Fate of a Coupon Clipper?
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Definition
Relatively elastic demand, will shop around, will identify substitutes, and will get the lower price.
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Term
Are coupon schemes, price discrimination schemes?
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Definition
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Term
How are coupons, final and binding?
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Definition
They are non-transferable
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