Give a complete and concise definition of each of the following terms
a. deliberately erected entry barriers
b. inefficiency of monopoly
c. price discrimination
d. profit-maximizing equilibrium for a monopolist
a. Deliberately erected entry barriers are any actions taken for the purpose of preventing the entry of rivals. Such actions, for example, may take the form of costly lawsuits against rivals or exorbitantly expensive advertising campaigns. Illegal strong-arm tactics would also fall in the same category.
b. A monopoly is inefficient because it charges a higher price than does a competitive industry and sells a lower quantity. Therefore, the price (or marginal utility) of the last unit bought generally exceeds the marginal cost. From a social perspective, output is too little.
c. Price discrimination is the sale of a given product at different prices to different customers of the firm, when there is no difference in the cost of supplying different customers. Prices are also discriminatory if it costs more to supply one customer than another, but they are charged the same price.
d. The profit-maximizing monopolist is in equilibrium when he is producing where MR = MC but, because MU = P and MR lies below AR, MC = MR < P so that MC < MU.
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Why do some workers lose their job when the minimum wage is increased?
A) The increase in labor costs decreases the supply of the product, thereby raising the price of the good so that the equilibrium quantity decreases to zero. B) The increase in the minimum wage decreases the quantity of labor demanded. C) The demand for labor is perfectly inelastic. D) The supply of labor decreases. E) The demand for labor is perfectly elastic.
In a perfectly competitive market, if market price is higher than the average total cost of production, ________
A) firms will incur losses in the long run B) firms will make profits in the long run C) new firms will enter the industry D) firms will exit the industry
A nonmonetary opportunity cost is
A) an explicit cost. B) a direct cost. C) an implicit cost. D) an accounting cost.
The division of labor
a. allows more people to be employed b. allows tasks to be performed more efficiently c. makes people happier on the job d. means that less management is required e. means that less equipment will be used