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Monopoly |
The sole seller of a product without close substitutes Has market power It’s a PRICE MAKER |
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Natural Monopoly |
Single firm that produces the entire market Q at a lower cost than several firms could |
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Output effect |
Higher output = higher revenue |
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Price effect |
Lower price = lower revenue |
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Price discrimination |
Selling some good at different prices to different people |
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A firm is a natural monopoly if it exhibits the following as its output increases: |
decreasing average total cost. |
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For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price , marginal revenue , and marginal cost ? |
P>MR and MR = MC |
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If a monopoly’s fixed costs increase, its price will _____, and its profit will _____. |
stay the same, decrease |
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Compared to the social optimum, a monopoly firm chooses |
a quantity that is too low and a price that is too high. |
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The deadweight loss from monopoly arises because |
some potential consumers who forgo buying the good value it more than its marginal cost. |
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When a monopolist switches from charging a single price to perfect price discrimination, it reduces |
Consumer Surplus |
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