Flashcards
Theory of the Firm & Monopoly
Cards in this deck (9)
- 1Why may the long-run supply be upward-sloping? (2)1. Some resources used in previous production may only be available in small quantities.
2. Firms may have different costs - 2What is a 'Marginal Firm'?The firm that would exit the market if price were to decrease any further.
- 3In the long-run...Economies of Scale is always met.
- 4Give an example of a firm that is a 'price maker'A monopoly firm.
(Competitive firms are given a price.) - 5What are the characteristics of a 'monopoly firm'? (2)1. Sole seller of it's products
2. It has no close substitutes - 6Why are the barriers to entry so high for monopolistic firms? (3)1. They may own a key resource
2. They may have exclusive production rights from the government
3. Has production costs much lower than smaller businesses - 7What are the three main differences between monopoly verses competition?
- 8A monopoly increasing sales has two effects on total revenue (TR)...1. The Output Effect - (more output is sold so TR is higher)
2. The Price Effect - (price falls so TR is lower) - 9At what point does a monopoly maximise it's profit?When MR = MC.