Page 177 - DECO405_MANAGERIAL_ECONOMICS

Managerial Economics

Notes (iii) the same amount of output as a competitive industry
(iv) none of above.
(b) The quantity supplied by a profit maximizing monopolist is:
(i) equal to quantity demanded at competitive market price
(ii) insufficient to supply the quantity demanded at monopoly price

(iii) equal to quantity demanded when price equals marginal cost
(iv) insufficient to satisfy the quantity demanded at the competitive market price
(c) Which of the following is not true of a profit maximizing monopoly firm in
equilibrium?

(i) total profit is maximum for the firm
(ii) there is less output than under competitive conditions
(iii) average costs are minimum at the equilibrium rate of output
(iv) the price is higher than under competitive conditions.

3. Fill in the blanks:
(a) Under monopoly .............. firm constitutes the whole industry.
(b) In monopoly the demand curve for the firm and industry is............. .
(c) In the short run monopolist will continue working so long as price is above the
............. .
(d) In monopoly seller may indulge in price ................... .
(e) Since there will be no new entry, it is not necessary for the monopolist to reach
............ scale.
(f) If a seller is charging less price in the world market than in the home market, it is
called ............. .

(g) In monopoly product has no close ............... .
10.7 Review Questions

1. What perfect competitive market and pure monopoly market have in common?
2. How can a monopoly market be a disadvantage to consumers?
3. In what market did Microsoft have a monopoly in the late 1990s? What technological
advances threatened that monopoly?
4. The water company is privately owned and is the only water company in town. It is
licensed and franchised by the city for a 10 - year term, just renewed. They advertise on TV,
enclose a newsletter with their bills, and donate to local school activities. Why do they do
these things?
5. The diagram below represents an industry that was in perfect competition that has become
a monopoly. Which area on the graph shows the level of producer surplus that will exist
under the monopoly?

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