Identify whether each statement is true or false. Market power is the ability of a firm to charge a price greater than marginal cost Most markets are perfectively competitive Charging a price greater than marginal cost leads to maximum economic efficiency In reality, few markets are perfectively competitive

Identify whether each statement is true or false. Market power is the ability of a firm to charge a price greater than marginal cost Most markets are perfectively competitive Charging a price greater than marginal cost leads to maximum economic efficiency In reality, few markets are perfectively competitive

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Demand for microprocessors is given by P = 35 – 5Q , where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi, where qi is the output of firm i. a) Under perfect competition, find total industry profit and consumer surplus.
Suppose the total cost of a representative perfectly competitive apple producer is given as TC = 12 + 6q + q². All apple producers in the market are assumed to be identical. Suppose further that the demand for apples is estimated as Qa = 18,000 – 500P and market supply is Qs = 2,000 + 500P. a) Find the equilibrium market price and total supply of apples in the market. b) What is the profit maximizing quantity of apples each company would produce? Find the total revenue, total cost and profits associated with the profit maximizing quantity. c) Comment on whether this is an equilibrium in the short-run or in the long-run. Which assumption of perfectly competitive markets do you base your response on? d)What is the short-run supply function of this apple producer? e) What is the number of companies in the market in the short run? f) Using the assumptions of the perfectly competitive model, comment on what will happen in the market in the long run. What will be the new equilibrium price?…
Limiting Market Power: Regulation and Anti-Trust Predatory pricing threatens to keep competitors out of the market. It is a price that is so low that it will be profitable for the firm that adopts it only if a rival is driven out of the market. Debate why predatory pricing is an economic inefficiency in a perfectly competitive.
consider a market with a large number of firms, an upward sloping supply curve S0, and a downward sloping demand curve D0. We will start with the assumption that the market is perfectly competitive; hence, the supply curve S0 is the sum of the marginal cost curves of all the firms. Assume the market is perfectly competitive. Indicate the original competitive equilibrium price P0, equilibrium quantity Q0, the resulting Consumer Surplus CS0, the resulting Producer Surplus PS0, and the “socially optimal” output (the output the Benevolent Dictator would choose) QSO on your graph. Graphically indicate the size of Dead-Weight Loss DWL0 if there is such a loss. Question - Now suppose that scientists discover that this particular product has a significant Positive Externality. The Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal…
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Suppose that demand is given by P = 1200 – Q and all firms have constant marginal cost of 800 per unit of output. If an innovator firm can reduce costs to 200 per unit of output, what price will it charge in order to capture the entire market?
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