Microecon final exam

Monopolist continues increasing output until:

• Break even

• MR = MC

• P = MR

• P = MC

True about unregulated monopolies:

• Productively, but not allocatively inefficient

• Allocatively, but not productively inefficient

• Both productively and allocatively inefficient

• Neither productively nor allocatively inefficient

Market with single producer producing at lower cost than competitors:

• Unregulated monopoly

• Oligopoly

• Natural monopoly

• Trade association

Example of an economic barrier to entry:

• Patent

• Economies of scale

• Licensing fee

• Copyright

• Sole ownership of a resource

Economic surplus:

• Ratio of consumer to producer surplus

• Difference between consumer and producer surplus

• Difference between tax revenue and govt expenditure

• Sum of consumer and producer surplus

• Minimized at market equilibrium

Allocative efficiency occurs when:

• Price = short-run average cost

• Price = long-run average cost

• Price = marginal cost

• Price < marginal cost

Example of a private good:

• Chartered bank loans

• Streetlights

• Fresh air

• Military defence

• TransCanada highway

Example of a public good:

• Cigarettes

• TransCanada highway

• Chartered bank loans

• Restaurants

‘Non-rival’ means:

• One person’s consumption doesn’t reduce availability for others

• Impossible to prevent buyers enjoying benefits

• Markets can prevent buyers enjoying benefits

• Some consumers can prevent others enjoying benefits

Experiencing economies of scale → firm should:

• Increase its size

• Decrease its size

• Decrease output

• Increase costs