Econ Ch 13

Front 1

Market power

Back 1

Ability of a firm to raise prices

Front 2

4 barriers to entry

Back 2

1-control of natural resources or inputs

2-increasing returns to scale

3-technology superiority

4-govt made barriers including patents and copyrights

Front 3

When does natural monopoly occur, and one example

Back 3

Increasing returns to scale provide a large cost advantage to a single firm-ex Hoover dam

Front 4

Network externality

Back 4

The valué of a g / s increases as more people use it

Front 5

Patent

Back 5

Gives an inventor temporary monopoly in use or sale of an invention

Front 6

Copyright

Back 6

Gives creator of literary or artistic work sole rights to profit from that work

Front 7

How monopolists maximize profit

Back 7

Produce Q where MR=MC, competitive firms can’t choose the price , monopoly can

Front 8

MR =

Back 8

Change in total revenue divided by change in quantity

Front 9

Where is MR in relation to the demand curve

Back 9

Below

Front 10

Increase in production has 2 effects :

Back 10

Quantity effect : 1 more unit is sold , increasing total revenue by price of that unit

Price effect : to sell last unit , monopolist must cut market price on all units sold —thus decreasing total revenue

Front 11

2 steps od profit maximization:

Back 11

choose Q where MR=MC, choose highest price you can get away with (follow graph up to demand curve )

Front 12

Monopolies profit is protected by

Back 12

Strong entry barriers

Front 13

When monopoly raises price and Lowers Q...

Back 13

Consumer surplus falls, DWL is created

Front 14

Govt policies used to prevent or eliminate monopolies are called

Back 14

Antitrust policies

Front 15

Natural monopolies bring lower prices . 2 solutions for dealing with natural monopolies :

Back 15

Public (govt) ownership:

Price regulation : price ceiling

Front 16

Monopsony

Back 16

Only one buyer of a good

Front 17

If your consumers have low price elasticity ..

Back 17

Charge them more

Front 18

Done

Back 18

Done