AP Micro monopoly flashcards

Define monopoly.

A market structure where a single seller controls the entire supply of a product.

True or false: Monopolies lead to increased competition.

False, because monopolies reduce competition in the market.

What is the demand curve for a monopolist?

Downward sloping; the monopolist sets the price based on quantity supplied.

Difference between monopoly and perfect competition.

Monopoly has one seller, while perfect competition has many sellers.

What is price discrimination?

Charging different prices to different consumers for the same good.

What is a natural monopoly?

Occurs when a single firm can supply the entire market at a lower cost than multiple firms.

Fill in the blank: Monopolists maximize profit where ______.

Marginal cost equals marginal revenue.

True or false: Monopolies can affect consumer surplus.

True, because they reduce consumer surplus by increasing prices.

Define barriers to entry.

Obstacles that prevent new competitors from easily entering an industry.

What is marginal revenue for a monopolist?

Change in total revenue from selling one more unit; always less than price.

Example of a monopoly in the US.

Local utility companies often operate as monopolies.

Which market structure has the highest market power?

Monopoly has the highest market power compared to others.

True or false: Monopolists produce at the lowest cost.

False, because they may not produce at minimum average cost.

What is the key feature of a monopoly?

Single seller with no close substitutes for the product.

Describe a price maker.

A firm that can set the price of its product rather than taking the market price.

Which of the following is a monopoly characteristic?

Single seller, unique product, significant barriers to entry.

True or false: Monopolies always result in market failure.

False, while often inefficient, they can also innovate.

What is consumer surplus?

The difference between what consumers are willing to pay and what they actually pay.

Fill in the blank: The deadweight loss occurs in a monopoly due to ______.

Reduced quantity supplied compared to a competitive market.