Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does not affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. The following graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly vendor. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. PRICE (Dollars per gyro) Monopoly 4.0 Monopoly Outcome 3.5 MC 5.0 4.5 2.5 20 299 2 2 2 2 2 2 2 1.5 1.0 0.5 D MR 0 0 50 100 150 200 300 350 400 QUANTITY (Gyros) 450 500 Deadweight Loss Consider the welfare effects that result from the industry operating as 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 a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. 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. Price Market Structure (Dollars) Quantity (Gyros) Competitive Monopoly 3.00 150 monopoly competitive market Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a competitive market. and the quantity is higher under a competitive market Grade It Now Save & Continue
Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does not affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. The following graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the monopoly vendor. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist. PRICE (Dollars per gyro) Monopoly 4.0 Monopoly Outcome 3.5 MC 5.0 4.5 2.5 20 299 2 2 2 2 2 2 2 1.5 1.0 0.5 D MR 0 0 50 100 150 200 300 350 400 QUANTITY (Gyros) 450 500 Deadweight Loss Consider the welfare effects that result from the industry operating as 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 a monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody. Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive outcome. 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. Price Market Structure (Dollars) Quantity (Gyros) Competitive Monopoly 3.00 150 monopoly competitive market Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a competitive market. and the quantity is higher under a competitive market Grade It Now Save & Continue
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
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Transcribed Image Text:Now assume that one of the gyro vendors successfully petitions the neighborhood development board to obtain exclusive rights to sell gyros in the
neighborhood. This firm buys up all the rest of the gyro food trucks in the area and begins to operate as a monopoly. Assume that this change does
not affect demand and that the marginal cost curve of the new monopoly corresponds exactly to the supply curve from the previous graph. The
following graph reflects this new set of assumptions, and shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for the
monopoly vendor.
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity of a monopolist.
PRICE (Dollars per gyro)
Monopoly
4.0
Monopoly Outcome
3.5
MC
5.0
4.5
2.5
20
299 2 2 2 2 2 2 2
1.5
1.0
0.5
D
MR
0
0
50 100
150 200
300 350 400
QUANTITY (Gyros)
450 500
Deadweight Loss
Consider the welfare effects that result from the industry operating as 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 a
monopoly. That is, show the area that was formerly part of total surplus and now does not accrue to anybody.
Deadweight loss occurs when a market is controlled by a monopoly because the resulting equilibrium is different from the (efficient) competitive
outcome.
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.
Price
Market Structure (Dollars)
Quantity
(Gyros)
Competitive
Monopoly
3.00
150
monopoly
competitive market
Given the summary table of the two different market structures, you can infer that, in general, the price is higher under a competitive market.
and the quantity is higher under a competitive market
Grade It Now
Save & Continue
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