Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. Thisfirm buys up all the rest of the hot dog vendors in the city and operates as a monopoly. Assume that this change doesn't affect demand and that thenew monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph showsthe demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm.Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.PRICE (Dollars per hot dog)5.04.54.03.53.02.52.01.51.00.50045MonopolyMCMR90 135 180 225 270 315QUANTITY (Hot dogs)D360405 450Monopoly OutcomeDeadweight Loss? Consider the welfare effects when the industry operates under a competitive market versus a monopoly.On the monopoly graph, use the black points (plus symbol) to shade the area that represents the loss of welfare, or deadweight loss, caused by amonopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody.Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which isefficient.In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity thatwould be chosen if a monopolist controlled this market.PriceMarket Structure (Dollars)CompetitiveMonopolyQuantity(Hot dogs)Given the summary table of the two different market structures, you can infer that, in general, the price is lower under aand the quantity is lower under a

A monopoly is a firm who is the sole seller of its product, and where there are no nearby…

demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. e the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. ? 5.0 4.5 4.0 3.5 3.0 2.5 N Monopoly Monopoly Outcome Deadweight Loss

demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. e the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. ? 5.0 4.5 4.0 3.5 3.0 2.5 N Monopoly Monopoly Outcome Deadweight Loss

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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