4) Application problems (Topic 9 & 10) Perfect Competition versus Monopoly: A small country town is served by many competing (price-taking) fruit and vegetable shops, who all have the same marginal costs. They then get together and decide to operate as one large monopoly firm. Using the diagram below, answer the following questions: (a) * What was the equilibrium price and quantity in this market when the firms were competing each other? What is the new price and quantity once they form a monopoly? (b) aga *** What was the dollar value of the consumer and producer surplus under (i) perfect competition, and (ii) under monopoly? What, if any, is the size of the deadweight loss implied by this market transitioning into a monopoly? Price $23 I Supply EMC $13 $10.5 $9 $3 1.000 Demand Marginal Revenue 1.250 Quantity
4) Application problems (Topic 9 & 10) Perfect Competition versus Monopoly: A small country town is served by many competing (price-taking) fruit and vegetable shops, who all have the same marginal costs. They then get together and decide to operate as one large monopoly firm. Using the diagram below, answer the following questions: (a) * What was the equilibrium price and quantity in this market when the firms were competing each other? What is the new price and quantity once they form a monopoly? (b) aga *** What was the dollar value of the consumer and producer surplus under (i) perfect competition, and (ii) under monopoly? What, if any, is the size of the deadweight loss implied by this market transitioning into a monopoly? Price $23 I Supply EMC $13 $10.5 $9 $3 1.000 Demand Marginal Revenue 1.250 Quantity
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:4)
Application problems
(Topic 9 & 10) Perfect Competition versus Monopoly: A small country town is served by many
competing (price-taking) fruit and vegetable shops, who all have the same marginal costs. They
then get together and decide to operate as one large monopoly firm. Using the diagram below,
answer the following questions:
(a) * What was the equilibrium price and quantity in this market when the firms were competing
each other? What is the new price and quantity once they form a monopoly?
(b)
aga
*** What was the dollar value of the consumer and producer surplus under (i) perfect
competition, and (ii) under monopoly? What, if any, is the size of the deadweight loss implied
by this market transitioning into a monopoly?
Price
$23
I
Supply EMC
$13
$10.5
$9
$3
1.000
Demand
Marginal Revenue
1.250
Quantity
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