ECN 212 UPDATED 2026 EXAM SCRIPT QUESTIONS AND
ANSWERS GRADED A+
✔✔Monopoly - ✔✔- Firm that is the sole seller of a product without close substitutes
- Price Maker
- Cause: barriers to entry
✔✔Barriers to entry - ✔✔- A monopoly remains the only seller in the market
- because other firms cannot enter the market and compete with it
1. Monopoly resources
2. Government regulation
3. The production process
✔✔Monopoly resources - ✔✔-A key resource required for production is owned by a
single firm
- higher price
✔✔Why Monopolies Arise: natural monopoly - ✔✔- a single firm can supply a good or
service to an entire market
- At a smaller cost than could two or more firms
- economies of scale over the relevant range of output
- club goods
-excludable but not rival in consumption
✔✔Production and pricing decisions: Monopoly - ✔✔- price maker
- sole producer
- downward sloping demand: the market demand curve
✔✔Production and pricing decisions: Competitive firms - ✔✔- price taker
- one producer of many
- demand is a horizontal line
✔✔A monopoly's marginal revenue - ✔✔- revenue per each additional unit of output
- change in total revenue when output increases by. 1 unit.
- MR < P
- Downward sloping demand
- to increase the amount sold, a monopoly firm must lower the price it charges to all
customers
- can be negative
- Increase in quantity sold
- output effect
- q is higher: increase total revenue
- price effect
- p is lower : decrease total revenue
- because MR < P
, -marginal revenue curve is below the demand curve
✔✔Profit maximization - ✔✔- if MR > MC: increase production
- IF MC > MR: produce less
- Maximize profit
- Produce quantity where MR = MC
- Intersection of the marginal revenue curve and the marginal cost curve
- Price =: on the demand curve
✔✔welfare of monopolies: total surplus - ✔✔- economic well being of buyers and sellers
in a market
- sum of consumer surplus and producer surplus
✔✔welfare of monopolies: consumer surplus - ✔✔- consumer's willingness to pay for a
good
- minus the amount they actually pay for it
✔✔welfare of monopolies: producer surplus - ✔✔- amount producers receive for a good
- minus their costs pf producing it
✔✔welfare of monopolies: benevolent planner - ✔✔- maximize total surplus
- socially efficient outcome
- produce quantity where
- marginal cost curve intersects demand curve
- charge P = MC
✔✔welfare of monopolies: monopoly - ✔✔- produce quantity where MC = MR
- produce less than the socially efficient quantity of output
- charge p > MC
-Deadweight loss
- triangle between the demand curve and MC curve
✔✔welfare of monopolies: The monopoly's profit: a social cost? - ✔✔- monopoly -
higher profit
- not a reduction of economic welfare
- bigger producer surplus
- smaller consumer surplus
- not a social problem
- social loss = dead weight loss
- from the inefficiently low quantity of output
✔✔price discrimination - ✔✔- sell the same good at different prices to different
customers
- rational strategy to increase profit
- requires the ability to separate customers according to their willingness to pay
ANSWERS GRADED A+
✔✔Monopoly - ✔✔- Firm that is the sole seller of a product without close substitutes
- Price Maker
- Cause: barriers to entry
✔✔Barriers to entry - ✔✔- A monopoly remains the only seller in the market
- because other firms cannot enter the market and compete with it
1. Monopoly resources
2. Government regulation
3. The production process
✔✔Monopoly resources - ✔✔-A key resource required for production is owned by a
single firm
- higher price
✔✔Why Monopolies Arise: natural monopoly - ✔✔- a single firm can supply a good or
service to an entire market
- At a smaller cost than could two or more firms
- economies of scale over the relevant range of output
- club goods
-excludable but not rival in consumption
✔✔Production and pricing decisions: Monopoly - ✔✔- price maker
- sole producer
- downward sloping demand: the market demand curve
✔✔Production and pricing decisions: Competitive firms - ✔✔- price taker
- one producer of many
- demand is a horizontal line
✔✔A monopoly's marginal revenue - ✔✔- revenue per each additional unit of output
- change in total revenue when output increases by. 1 unit.
- MR < P
- Downward sloping demand
- to increase the amount sold, a monopoly firm must lower the price it charges to all
customers
- can be negative
- Increase in quantity sold
- output effect
- q is higher: increase total revenue
- price effect
- p is lower : decrease total revenue
- because MR < P
, -marginal revenue curve is below the demand curve
✔✔Profit maximization - ✔✔- if MR > MC: increase production
- IF MC > MR: produce less
- Maximize profit
- Produce quantity where MR = MC
- Intersection of the marginal revenue curve and the marginal cost curve
- Price =: on the demand curve
✔✔welfare of monopolies: total surplus - ✔✔- economic well being of buyers and sellers
in a market
- sum of consumer surplus and producer surplus
✔✔welfare of monopolies: consumer surplus - ✔✔- consumer's willingness to pay for a
good
- minus the amount they actually pay for it
✔✔welfare of monopolies: producer surplus - ✔✔- amount producers receive for a good
- minus their costs pf producing it
✔✔welfare of monopolies: benevolent planner - ✔✔- maximize total surplus
- socially efficient outcome
- produce quantity where
- marginal cost curve intersects demand curve
- charge P = MC
✔✔welfare of monopolies: monopoly - ✔✔- produce quantity where MC = MR
- produce less than the socially efficient quantity of output
- charge p > MC
-Deadweight loss
- triangle between the demand curve and MC curve
✔✔welfare of monopolies: The monopoly's profit: a social cost? - ✔✔- monopoly -
higher profit
- not a reduction of economic welfare
- bigger producer surplus
- smaller consumer surplus
- not a social problem
- social loss = dead weight loss
- from the inefficiently low quantity of output
✔✔price discrimination - ✔✔- sell the same good at different prices to different
customers
- rational strategy to increase profit
- requires the ability to separate customers according to their willingness to pay
