The monopoly and price elasticity of a demand.
Explanation of Solution
We could possibly say that the mentioned statement is true. There is pure monopoly which is nonexistent. Let us say, that if you need to send a letter, then the only option we think of is the postal service. But in case, the postal service increases the charges of delivering a letter to the adjacent town, to two days by $15, then we will look for alternate options like using a courier, phone or fax the letter. But within the conscious limits, even if the rates are doubled, we have no substitute that can live up to the mark of a postal service, that too at a commensurate rate.
The same can be explained about pure monopoly, when we consider local electricity provider companies in any given town. If you need electricity for lights, fans, etc you can deal only with a sole company. So, it enjoys pure monopoly, even though other sources of energy like oil or kerosene are used for the basic purposes like heating or for the lights, but these are never going to be a convenient option for end users.
The idea of cross elasticity of the
Concept Introduction:
Cross
Monopoly: It is a market situation, in which only one producer or seller exists in the market. There is a restriction in the entry to the business.
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- what is the efficiency (or deadweight) loss due to monopoly control of the industry?arrow_forwardIgnore AFC and AVC 2. Suppose a pure monopolist faces the following demand schedule and the same cost data as the competitive producer discussed in problem 4 at the end of Chapter 10. Calculate the missing TR and MR amounts, and determine the profit-maximizing price and profit-maximizing output for this monopolist. What is the monopolist's profit? Verify your answer graphically and by comparing total revenue and total cost. LO11.4 Average Total Average Variable Average Marginal Product Fixed Cost Cost Total Cost Cost 0 $45 1 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 9 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Price Quantity Demanded Total Revenue Marginal Revenue $115 83 63 55 48 42 29 2 % 522332 100 0 1 2 3 4 5 6 7 37 8 9 10 $arrow_forward1. The table below represents the demand for Widgets, Inc., which has a monopoly in the sale of widgets. Calculate total revenue and marginal revenue for the levels of output given. Draw the demand curve and the marginal revenue curve in a same graph. Quantity 0 1 2 3 4 LO 5 Price $25 21 17 13 9 LO 5arrow_forward
- The figure on the right shows the demand schedule for a product produced by a single-price monopolist. Price ($) 9 8 0000 7 6 5 4 3 C. 5th unit Quantity demanded What is the lowest level of output at which marginal revenue becomes negative? OA. 6th unit OB. 9th unit D. 7th unit OE. 8th unit 5 6 7 8 9 10 11 Price ($) 141 222 =26=LO 13- 12- 11- 10- 9- 8- 4- 2- 1- 45 6 7 8 9 10 11 12 13 14 15 16 Quantity Earrow_forward6. The total cost curve for firms in a natural monopoly is estimated to be: TC = 2Q3 – 100Q² + 10000Q The government has a desired industry output of 100. What is the minimum efficient scale in this industry? O 5% O 10% O 12.5% O 25% O 50%arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- 500 450 400 出350 300 250 是 200 150 LRAC 100 MC 50 MR 3 4 Quantity (hundreds of trips per month) If a marginal cost pricing rule is imposed on the single-price natural monopoly in the figure above, then the deadweight loss will be per month. If a marginal cost pricing rule is imposed on the single-price natural monopoly in the figure above, then the deadweight loss will be per month. $20,000 O so $40,000 O$80,000 $45,000 $5,000 Price and costs (dollars per trip)arrow_forwardPrice and cost (dollars per unit) 50.00 40.00 S=MC 30.00 20.00- 10.00. MR D. 100 200 300 400 500 Quantity (units per hour) In the above figure, a monopoly should charge $ for its output when maximizing profit. O $10 $20 $30 $40 O $50arrow_forwardThe following diagram depicts the operating conditions for a profit-maximising monopolist. Calculate the deadweight loss created by this monopoly selling at the profit maximising point. Price ($) MC 10 Demand MR 5 7.5 10 Quantity (a) $4.25 (b) $6.25 (c) $8.25 (d) None of the above. 20 15 LO 20 15arrow_forward
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Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax