In Figure 24.1, the profit-maximizing monopolist will charge a price of
A - the highest price possible
In Figure 24.2, the profit-maximizing level of output is
4 units (intersection of MR & MC)
In Figure 24.2, the profit-maximizing monopolist will earn a profit per unit of
$1.50
The profit-maximizing rate of output in Figure 24.1 is
F (quantity where MR = MC)
A barrier to entry is
An obstacle that makes it difficult for new firms to enter a market.
A major difference between monopoly and monopolistic competition is
The number of firms in the market.
A monopolist will find that its marginal revenue curve
Lies below its demand curve and is steeper than its demand curve
A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because
Of product differentiation and brand loyalty
An industry's market structure refers to
The number and size of the firms in the industry
Both perfect competitors and monopolistic competitors
Earn zero economic profit in the long run
Each producer in monopolistic competition has
Some market power.
Entry into a market characterized by monopolistic competition
Is frequent because barriers to entry are low.
Firms in a monopolistically competitive market will
Use the profit-maximizing rule MC = MR
If a firm can change market prices by altering its output, then it
Has market power
If the entire output of a market is produced by a single seller, the firm
Is a monopoly
If there are many firms in an industry producing goods that are similar but slightly different, this is an example of
Monopolistic competition.
In monopolistic competition, a firm
Has a downward-sloping demand curve
Large cities typically have many drugstores that offer different levels of service and product selection. The drugstore market in big cities can best be classified as
Monopolistic competition.
Market power is the ability of a firm to
Control the price and quantity supplied
Market share is the percentage of total
Market output produced by a single firm
Monopolists set prices
At the output where marginal revenue equals marginal cost.
Product differentiation
Involves advertising unique product features
Product differentiation refers to
Features that make one product appear different from competing products in the same marke
Reductions in minimum average costs that come about through increases in the size of plants and equipment are called
Economies of scale
The concentration ratio measures the
Proportion of total output produced by the four largest producers in a specific marke
The demand curve faced by a monopolistically competitive firm is
Downward-sloping
The demand curve will be kinked if rival oligopolists
Match price reductions but not price increases.
The goal of a company in an oligopoly industry is to
Increase market share and profits
The kinked demand curve explains the observation that in oligopoly markets
Prices may not change even in the face of cost increases
The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is
Oligopoly
The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as
Oligopoly
There are many corn farmers, each of whom produces the same product. The corn market can best be classified as
Perfect competition.
What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?
Cut their prices
When firms are interdependent,
The profit of one firm depends on how its rivals respond to its strategic decisions.
Which of the following characterizes monopolistic competition?
Many firms produce a particular type of product, but each maintains some independent control over its own price
Which of the following industries is likely to have the highest concentration ratio?
Video game systems
Which of the following is a barrier to entry in a monopoly market?
A patent on a new product.
Which of the following is a barrier to entry in a monopoly market?
Economies of scale
Which of the following is likely to be a monopolist?
A drug firm that has a patent granting it the exclusive right to produce a drug.
Which of the following is not characteristic of monopolistic competition?
Firms have zero control over price
Which of the following is not true about a monopolistic competitor?
It can earn economic profits in the long run
Which of the following is true about a monopolistically competitive firm in the long run?
It tends to realize only a normal profit
Which of the following is true for a monopolist?
It must lower its price on all of its units in order to sell any additional units.
Which of the following may not characterize an oligopoly?
No market power.
Which of the following rules is satisfied when a monopoly maximizes profits?
MR = MC.