Refer to the graph below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer the next three questions. 50 40 * 30 LAC - LMC 20 10 50,000 100,000 Quantity is the deadweight loss caused by the market power created by the high entry barrier Price and cost ($)

Refer to the graph below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer the next three questions. 50 40 * 30 LAC - LMC 20 10 50,000 100,000 Quantity is the deadweight loss caused by the market power created by the high entry barrier Price and cost ($)

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter9: Market Structure And Long-run Equilibrium

Section: Chapter Questions

Problem 9.5IP

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Price (dollars per unit) 600 400 AC = MC De mand Marginal revenue 200 400 Computers (units per day) The graph above shows the average cost, marginal cost, demand, and marginal revenue curves for selling computers in a given market. The computer industry is currently perfectly competitive and in equilibrium. Suppose all firms in the industry are taken over by a single firm that establishes a monopoly in the market. Assuming the monopoly maximizes profit, Select one: there will be no effect on the price of computers. Ob. the price of computers will increase from $400 to $600, but there will be no change in quantity demanded. Oc. the price of computers will be set equal to the marginal cost of computers. O d the price of computers will increase from $400 to $600, and the quantity demanded will fall from 400 to 200 per day.
The following diagram provides demand and cost curves for a product supplied by a natural monopoly. Use the information in the graph to answer the questions below. P ($ per week) 20 15 10 5 7.5 2 D 10 15 6.5 18 20 AFC-ATL-AVC-35-2= 1.5 F=AFC • Q=1.,5x/6.5=24.75 1. This natural monopolist has fixed costs of F = $24.75 0 TR = 1/2 x 18 × 20 = 185 P-ML-24. 0 5 25 30 2 D ATC R=(P-ATC) &Q=(2-35)×18=-27 2. A monopoly that charges a single, profit maximizing price, will earn a profit of π = -27 TC=MCQ = 2x 18 =36. PC=TR²-² TC = 18³-36=144 3. A perfect price discriminating monopoly will earn a profit of π = /44 If the monopolist introduces a two-part tariff, the profit maximizing strategy would be to charge an access fee of M = $ 62 and a user-fee of P = $ per unit. 5. With a profit maximizing two-part tariff, the monopolist would earn a profit of л = $ 6. If the government were to impose a price regulation that capped price at marginal cost, the optimal output strategy of the firm would be Q=…
What happens if a perfectly competitive industry becomes a monopoly? Suppose the demand curve in the figure is market demand and the corresponding market supply curve represents the marginal cost of production. Compared to perfect competition, a profit-maximizing monopoly would decrease output by 2 units. (Enter your response as an integer) In addition, a monopoly would lower price by $12 Price and cost per unit 20- 18- 10- 14- 12- 10- 8- 8- 4- 2 SMC D G MR 2 ° 10 12 14 10 18 20 Quantity
When selling downloadable software, e-books, and music streaming platforms, the marginal cost of making one more unit is basically zero. The average total cost is currently $1 per book. If a monopoly is operating in this market and is maximizing profits, marginal revenue is Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Greater than $0 Less than $0 $0 d $1 e There is not enough information to answer this question.
The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. The table below shows the cost and demand data for this government-protected monopolist. Quantity per Day (cases) 1 2 3 $49.0 $42.0 $47.0 $34.5 5 6 7 8 10 Price per Case $16 15 14 13 12 11 10 7 What is the amount of profit that the firm earns? Total Cost $7.00 9.50 11.00 12.00 14.50 17.00 21.00 25.00 30.00 35.50
The accompanying diagram shows demand and long-run cost conditions in a price-searcher market with high barriers to entry. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. Then, use the gray rectangle (star symbols) to shade the area corresponding to the profit or losses in this industry. PRICE 6 7 5 2 1 0 MC 0 1 2 3 LRATO MR QUANTITY 5 6 7 D 8 Monopoly Outcome Profit or Loss Which of the following would best describe why an industry is likely to be monopolized? O The marginal cost curve intersects the demand curve at the profit-maximizing quantity.
The graph below shows the Market conditions of Honey’s Laundry service, which is the only laundry in Banani Residential Area. Considering the shop as a Monopoly market, answer the following questions: (a)In order to maximize profit, how many clothes does the shop clean ? (b)If the opening of five new laundry turns it into a perfectly competitive market, what should be the price Sunny’s laundry be charging now? (c)Compute the change in total revenue between part a and part b.
The table below depicts the daily output, price, and costs of a monopoly dry cleaner located near the campus of a remote college town. Compute the revenues at each output level and fill in the blanks (Enter dollars and cents and include minus signs where necessary.) Output (Suits Cleaned) 0 1 2 3 4 5 6 8 Price per Suit ($) $14.00 $13.50 $13.00 $12.50 $12.00 $11.50 $11.00 $10.50 $10.00 Total Costs ($) Total Revenue ($) $3.00 $6.00 $8.50 $10.50 $11.50 $13.50 $22.00 $30.00 $40.00 $ $ S S $
Blue INK is the only cabel service provider in Gazipur. The diagram below depicts the price, output and costs incurred by Blue INK. Use the graph to answer the following questions: 1. What is the Total revenue generated by Blue INK at the profit maximizing level of output? 2. If the Cable Service Market turns into a Perfectly Competitive Market, what will be the total ammount of the service provided? 3. If the market turns into a Monopoly market again, what will be the total deadweight loss created?
The demand curve for a monopolist's product is shown. The point UD is the point along the curve where price elasticity of demand is unitary. With this information, use the straight-line tool to draw the marginal revenue curve, stretching from one axis to the other. To refer to the graphing tutorial for this question type, please click here. 4 0 Price (5) 1000 1500 1400 1300 1200 1100 1000 900 400 7:00 600 500 13 OF 15-QUESTIONS COMPLETED N Qadd See Hint SUBMIT ANSWER
Consider a mature maket with a demand given by P=105.4-10Q The cost of production is given by C=10Q For many years this market has been served by a monopolist. How much profit would the firm lose if it is forced to behave as a competitive firm In all your calculations use numbers with 4 decimal places.
You are a consultant who is advising a monopoly on the optimal pricing strategy. Your analysis has yielded the following information. • The marginal cost (MC) is $3. • The demand equation is P = 90 - 3Q . The total cost (TC) is given by 35+ 3Q The marginal revenue (MR) is given by 90 - 6Q Based on this information, answer the following questions. Show FULL calculations! (a) Following the concepts of profit maximization, what is the profit maximizing quantity for this monopoly? (b) Following the concepts of profit maximization, what is the profit maximizing price for this monopoly? (c) Following the concepts of profit maximization, what is the monopoly's profit at the profit maximization point?