Final Exam - TXST Exam with 100% correct answers 2024

Be able to compare the profit-maximizing price, output, and profits of unregulated monopoly and perfect competition correct answers - Total Costs, Average Costs, and Marginal Costs all act the same in perfect competition -Shut down decisions are also the same. -Monopolies typically produce lowest possible quantity for the highest maximum price P>MR, P>MC. -Compared to a perfectly competitive market, a single-price monopoly produces a smaller output and charges a higher price. -In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. -In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. -Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient. -Monopolies produce an equilibrium at which the price of a good is higher, and the quantity lower, than is economically efficient. For this reason, governments often seek to regulate monopolies and encourage increased competition. Be able to find the profit maximizing output and price; total revenue, total cost and profit of the unregulated monopolist. correct answers P>MR, P>MC, MC=△TC/Q, Economic profit= TR-TC, TR=PxQ, TC=TFC+TVC Know the different types of barriers to entry correct answers constraint that protects firm from potential competition: Natural, ownership, legal Natural- creates a natural monopoly: a market in which economies of scale enable one firm to supply the entire market at the lowest possible cost. Ownership - occurs if one firm owns a significant portion of a key resource Legal - creates a legal monopoly: a market in which competition and entry are restricted by the granting of a public franchise, government license, patent or copyright. Know the characteristics of a monopoly correct answers -Monopolies set their own prices. -In order to sell a larger quantity, the monopoly must set a lower price. They use two different strategies to combat this with: single-price and Price discrimination. -Single-Price: a firm that must sell each unit of its output for the same price to all its customers. Price Discrimination: sells different units of a good or service for different prices. It charges the highest possible price possible for each unit of output and making the largest profit possible. See barriers^.