What is the effect of a price ceiling set below the socially optimal price?
It can lead to shortages and reduced output.
How does a price ceiling affect a monopoly's profits?
It can reduce or eliminate profits, potentially leading to losses.
What is the impact of antitrust laws on monopolies?
They aim to prevent monopolies from forming or to break them up, promoting competition.
What is the impact of government subsidies on monopolies?
Subsidies can encourage monopolies to produce at higher levels of output, potentially closer to the socially optimal level.
How does regulation requiring a fair-return price affect a monopoly?
It allows the monopoly to earn a normal profit, preventing economic losses but not achieving allocative efficiency.
What is the effect of taxing a monopoly?
It reduces the monopoly's profit and may lead to a decrease in output and an increase in price.
How does deregulation affect a previously regulated monopoly?
It can lead to higher prices and lower output if the firm still possesses significant market power.
What is the effect of a lump-sum tax on a monopoly's output?
A lump-sum tax only affects fixed costs and does not change the profit-maximizing output.
How do consumer protection laws affect monopolies?
They prevent monopolies from engaging in unfair or deceptive practices, protecting consumers.
What is the effect of encouraging competition through deregulation?
It can lead to lower prices, increased output, and greater innovation.
On a monopoly graph, where is the profit-maximizing quantity?
Where MR = MC.
On a monopoly graph, how do you find the profit-maximizing price?
Go up from the MR=MC point to the demand curve.
How is profit calculated on a monopoly graph?
(Price - ATC) x Quantity.
How is loss calculated on a monopoly graph?
(ATC - Price) x Quantity.
On a monopoly graph, what does the area between the demand curve and MC curve represent beyond the profit-maximizing quantity?
Deadweight loss.
On a monopoly graph, where is the socially optimal point?
Where D = MC.
On a monopoly graph, where is the fair-return point?
Where P = ATC.
On a monopoly graph, where is total revenue maximized?
Where MR = 0.
On a monopoly graph, how do you identify the elastic region of the demand curve?
The part of the demand curve above the point where MR = 0.
On a monopoly graph, what does the area between ATC and price at the profit-maximizing quantity represent?
Profit or loss, depending on which curve is higher.
What are the key differences between a monopoly and perfect competition?
Monopolies are price makers with high barriers to entry, while perfectly competitive firms are price takers with free entry and exit.
How do monopolies and perfectly competitive firms differ in terms of allocative efficiency?
Perfectly competitive firms are allocatively efficient (P=MC), while monopolies are not.
How do monopolies and perfectly competitive firms differ in terms of productive efficiency?
Perfectly competitive firms achieve productive efficiency in the long run (P = min ATC), while monopolies do not.
What are the differences between a monopoly and an oligopoly?
A monopoly has one firm, while an oligopoly has a few dominant firms.
How does the demand curve faced by a monopoly differ from that faced by a perfectly competitive firm?
A monopoly faces the market demand curve, which is downward sloping, while a perfectly competitive firm faces a perfectly elastic demand curve.
How do monopolies and perfectly competitive firms differ in their ability to earn long-run economic profits?
Monopolies can earn long-run economic profits due to barriers to entry, while perfectly competitive firms earn zero economic profit in the long run.
What are the differences between a single-price monopoly and a price-discriminating monopoly?
A single-price monopoly charges the same price to all customers, while a price-discriminating monopoly charges different prices to different customers.
How does the marginal revenue curve differ for a monopoly compared to a perfectly competitive firm?
For a monopoly, MR < P, while for a perfectly competitive firm, MR = P.
What are the differences between a natural monopoly and a legal monopoly?
A natural monopoly arises due to economies of scale, while a legal monopoly is created by government patents or copyrights.
How does consumer surplus differ under monopoly versus perfect competition?
Consumer surplus is lower under monopoly due to higher prices and lower output.
