Homework Help is Here – Start Your Trial Now!
Business
Economics
In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Competitive Monopoly Price (Dollars) Quantity (Hot dogs) Given the summary table of the two different market structures, you can Infer that, in general, the price is lower under a and the quantity is lower under a

In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Market Structure Competitive Monopoly Price (Dollars) Quantity (Hot dogs) Given the summary table of the two different market structures, you can Infer that, in general, the price is lower under a and the quantity is lower under a

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

5. Monopoly outcome versus competition outcome

 

Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run competitive equilibrium with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power.

 

The following graph shows the demand (D) and supply (S = MC) curves in the market for hot dogs.

Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. PRICE (Dollars per hot dog) 5.0 4.5 PRICE (Dollars per hot dog) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 5.0 4.5 4.0 3.5 3.0 Assume that one of the hot dog vendors successfully lobbles the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm 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 the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. 2.5 Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. (?) 2.0 1.5 1.0 0 0.5 0 45 90 0 45 Competitive Market 90 D L 135 180 225 270 315 360 405 450 QUANTITY (Hot dogs) S-MC Monopoly Competitive Monopoly MR D 135 180 225 270 315 360 405 450 QUANTITY (Hot dogs) MC + PC Outcome Price Market Structure (Dollars) (?) ** Consider the welfare effects when the Industry operates under a competitive market versus a monopoly. Quantity (Hot dogs) Monopoly Outcome 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 a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight Loss Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which is efficient. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Given the summary table of the two different market structures, you can infer that, in general, the price is lower under a and the quantity is lower under a
Transcribed Image Text:Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from competition. PRICE (Dollars per hot dog) 5.0 4.5 PRICE (Dollars per hot dog) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 5.0 4.5 4.0 3.5 3.0 Assume that one of the hot dog vendors successfully lobbles the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm 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 the new monopoly's marginal cost curve corresponds exactly to the supply curve on the previous graph. Under this assumption, the following graph shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly firm. 2.5 Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. (?) 2.0 1.5 1.0 0 0.5 0 45 90 0 45 Competitive Market 90 D L 135 180 225 270 315 360 405 450 QUANTITY (Hot dogs) S-MC Monopoly Competitive Monopoly MR D 135 180 225 270 315 360 405 450 QUANTITY (Hot dogs) MC + PC Outcome Price Market Structure (Dollars) (?) ** Consider the welfare effects when the Industry operates under a competitive market versus a monopoly. Quantity (Hot dogs) Monopoly Outcome 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 a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight Loss Deadweight loss occurs when a monopoly controls a market because the resulting equilibrium is different from the competitive outcome, which is efficient. In the following table, enter the price and quantity that would arise in a competitive market; then enter the profit-maximizing price and quantity that would be chosen if a monopolist controlled this market. Given the summary table of the two different market structures, you can infer that, in general, the price is lower under a and the quantity is lower under a
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Public Policy
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS