Suppose a farmer earns a larger profit than the "normal profit" by producing a special type of vegetable that becomes popular other farmers are likely to plant the same vegetable, pushing down the prevailing market price. O the firm will continue to earn its "normal profits" far into the future. O the farm's owners are likely to withdraw from the industry in order to retire early. other farmers are likely to plant the same vegetable, pushing up the prevailing market price.

Suppose a farmer earns a larger profit than the "normal profit" by producing a special type of vegetable that becomes popular other farmers are likely to plant the same vegetable, pushing down the prevailing market price. O the firm will continue to earn its "normal profits" far into the future. O the farm's owners are likely to withdraw from the industry in order to retire early. other farmers are likely to plant the same vegetable, pushing up the prevailing market price.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 4QR

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Similar questions

Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves?
In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
Why are urban areas willing to subsidize urban transit systems? Does the argument for subsidies make sense to you?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
How does the demand curve perceived by a monopolist compare with the market demand curve?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
Is a monopolist allocatively efficient? Why or why not?
From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
What is a natural monopoly?
In what sense is a natural monopoly natural?