Continuing with our analysis of a positive externality, in this question, we want to determine what would happen if the market was served by a monopolist. Suppose someone acquired all the firms in this industry. This new monopolist would have the exact same MC curve (the sum of the MC of the various competitive firms it acquired, also shown as S0) as shown in the introduction to Questions 5 through 7. The downward sloping demand curve would be the same as D0 (marginal private benefit curve), which does not take into account the positive externality of this good. Would the monopolist’s profit maximizing output be higher, lower, or the same as that of the competitive market? Explain your answer (no graph required). In this monopoly scenario, would the socially optimal output be higher, lower, or the same as the socially optimal output you identified for the competitive market with positive externalities in Question 6? Explain your answer (no graph required). In this monopoly scenario, would the DWL be higher, lower, or the same as the DWL you identified for the competitive market with positive externalities in Question 6? Explain your answer (no graph required). Could a monopolist improve the competitive market outcome for a good or a service with negative externalities? Why or why not? Please upload a single MS Word, Adobe PDF, or graphics file (JPEG, TIFF, PNG, BMP only) that does not exceed 5MBs with a narrative response and an optional graph as an answer to this question.
Continuing with our analysis of a positive externality, in this question, we want to determine what would happen if the market was served by a monopolist.
Suppose someone acquired all the firms in this industry. This new monopolist would have the exact same MC curve (the sum of the MC of the various competitive firms it acquired, also shown as S0) as shown in the introduction to Questions 5 through 7. The downward sloping demand curve would be the same as D0 (marginal private benefit curve), which does not take into account the positive externality of this good.
Would the monopolist’s profit maximizing output be higher, lower, or the same as that of the competitive market? Explain your answer (no graph required).
In this
In this monopoly scenario, would the DWL be higher, lower, or the same as the DWL you identified for the competitive market with positive externalities in Question 6? Explain your answer (no graph required).
Could a
Please upload a single MS Word, Adobe PDF, or graphics file (JPEG, TIFF, PNG, BMP only) that does not exceed 5MBs with a narrative response and an optional graph as an answer to this question.
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