Quiz 7 Resource Sheet Use the graph and the word bank for the answers to quiz 8.
ID: 1226796 • Letter: Q
Question
Quiz 7 Resource Sheet
Use the graph and the word bank for the answers to quiz 8.
Instead of filling in the blanks on the quiz with the actual words,
please fill them in with the corresponding numbers.
Word Bank
1
A
21
economic profits
41
output
2
B
22
efficiencies
42
over allocation
3
K
23
government regulation
43
patents
4
L
24
higher
44
price
5
M
25
licenses
45
price discrimination
6
N
26
losses
46
pure
7
X
27
lower
47
pure competition
8
Y
28
maker
48
purely competitive
9
Z
29
marginal
49
rare
10
anti-trust
30
marginal cost
50
regulation
11
average revenue
31
marginal revenue
51
resell
12
average
32
maximizing
52
scale
13
average fixed cost
33
microeconomics
53
segment
14
average total cost
34
minimizing
54
setter
15
average variable cost
35
monopoly (ies)
55
surplus
16
barriers
36
more
56
taker
17
common
37
MR
57
total revenue
18
competitors
38
natural
58
total cost
19
costs
39
near
59
trade
20
demand
40
normal
60
under allocation
QUESTION 1
1. Fill in all blanks with the numbers from the Resource Sheet, not the actual words.
Refer to Graph 1 on the Resource Sheet. Line A represents both the BLANK curve and the BLANK curve. Line B represents the BLANK curve. At equilibrium, this monopolist will produce (X, Y or Z -- fill in number from word bank, not letter) BLANK units of output and will charge a price of (K-N -- fill in number from word bank, not letter) BLANK . If this market were purely competitive, the equilibrium price charged for this item would be (higher/lower -- fill in number from word bank) BLANK and (more/less -- fill in number from word bank) BLANK units would be produced. In this picture, the distance hi represents BLANK and the distance ghrepresents per unit BLANK.
QUESTION 2
1. Unlike the purely competitive firm, which is a price BLANK , the monopolist is a price BLANK . That's because the monopolist can change the profit BLANK price by increasing or decreasing its BLANK . The existence of BLANK monopoly (where the firm owns 100% of the market and there is no government intervention or regulation) is relatively BLANK .
QUESTION 3
1. However, there are lots of examples of BLANK monopolies. A major factor that prevents competition within an industry would be the existence of BLANK to entry. One such example is the case of a BLANK monopoly which results from the phenomenon known as "economies of BLANK ." That is, if the BLANK declines over a wide range of output, it would be uneconomical to have any BLANK in the market. Also, government-imposed BLANK in the form of BLANK or BLANK could also prevent entry.
QUESTION 4
1. The monopolist may be able to employ the strategy of BLANK. This is where the monopolist charges different prices to different customers for reasons not associated with differences in BLANK. There are three market requirements in order to make this strategy feasible: first, there must be no BLANK in the industry. The monopolist must also be able to BLANK the market into different categories of customers. Finally, there must not be an opportunity to BLANK the product.
QUESTION 5
1. The problem with monopoly is that there are no internal forces, as there are in perfectly competitive industries, that will bring about the BLANK price (where P =BLANK in equilibrium), or the BLANK price (where BLANK = ATC in equilibrium). In some cases, subjecting the monopolist to BLANK can bring about a result that is superior to the free market outcome.
QUESTION 6
1. The "Dilemma of BLANK " refers to the problem that the government has in determining the appropriate product BLANK for a regulated BLANK . When the price is set to achieve the most efficient allocation of resources, the firm will often suffer economic BLANK . However, price that will cover its cost will only partially resolve the BLANK of resources that is inherent in unregulated monopoly. Also, such a pricing policy could lead to the problem of BLANK inefficiency.
Quiz 7 Resource Sheet
Use the graph and the word bank for the answers to quiz 8.
Instead of filling in the blanks on the quiz with the actual words,
please fill them in with the corresponding numbers.
Word Bank
1
A
21
economic profits
41
output
2
B
22
efficiencies
42
over allocation
3
K
23
government regulation
43
patents
4
L
24
higher
44
price
5
M
25
licenses
45
price discrimination
6
N
26
losses
46
pure
7
X
27
lower
47
pure competition
8
Y
28
maker
48
purely competitive
9
Z
29
marginal
49
rare
10
anti-trust
30
marginal cost
50
regulation
11
average revenue
31
marginal revenue
51
resell
12
average
32
maximizing
52
scale
13
average fixed cost
33
microeconomics
53
segment
14
average total cost
34
minimizing
54
setter
15
average variable cost
35
monopoly (ies)
55
surplus
16
barriers
36
more
56
taker
17
common
37
MR
57
total revenue
18
competitors
38
natural
58
total cost
19
costs
39
near
59
trade
20
demand
40
normal
60
under allocation
Explanation / Answer
1. Line A represents both the 20 curve and the 11curve. Line B represents the 37 curve. At equilibrium, this monopolist will produce 7 units of output and will charge a price of 3 . If this market were purely competitive, the equilibrium price charged for this item would be 27 and 36 units would be produced. In this picture, the distance hi represents 13 and the distance gh represents per unit 55.
2. Unlike the purely competitive firm, which is a price 6 , the monopolist is a price 3. That's because the monopolist can change the profit 24 price by increasing or decreasing its 41 . The existence of 46 monopoly is relatively BLANK .
3. However, there are lots of examples of 46 monopolies. A major factor that prevents competition within an industry would be the existence of 16 to entry. One such example is the case of a 46 monopoly which results from the phenomenon known as "economies of 52." That is, if the 44 declines over a wide range of output, it would be uneconomical to have any BLANK in the market. Also, government-imposed 23 in the form of 43 or 25 could also prevent entry.
4. The monopolist may be able to employ the strategy of 45. This is where the monopolist charges different prices to different customers for reasons not associated with differences in 41. There are three market requirements in order to make this strategy feasible: first, there must be no 18 in the industry. The monopolist must also be able to divide the market into different categories of customers. Finally, there must not be an opportunity to BLANK the product.
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