Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 12, Problem 2.1P
To determine
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Students have asked these similar questions
Q1
In many countries, the government chooses to "internalize" the monopoly by owning
monopoly providers of goods and services. Monopoly is one of the market structures in
Malaysia. It is characterized by the ability of one seller to gain high profits. In a place where
a monopoly operates, it is hard for other firms to start. An example of monopolies Malaysia
GLCS are Telekom Malaysia, TNB and etc. (In some cases, these firms are "nationalized,"
and the government actually buys or confiscates firms that operate in monopoly markets).
(a)
Explain TWO (2) advantages and disadvantages of such an approach above to
ensure that the "best interest of society" is promoted in these monopoly markets.
(b)
Economists however would prefer a private ownership of monopoly rather than a
public ownership of monopoly.
Many European governments are reluctant to allow online betting in an attempt to protect their national gambling businesses. A recent study found that seven countries out of the 27 in the European Union banned online gambling. Of the other 20 only 13 have opened their markets to competition; in the rest gambling is dominated by monopolies owned or licensed by the government. In the Netherlands, for example, residents can only place online bets with a state monopoly: De Lotto. The Ministry of Justice even warned banks in the country that they could be prosecuted if they transferred money to online gambling companies. Other countries have ordered online betting companies to block access to their sites. Their governments argue that this is to protect people from gambling excessively. However the revenue they gain from their own monopolies should not be ignored as a possible motive.
Questions
If governments believe that gambling is bad for their citizens then in economic terms how would…
Consider the graph below that represents the demand curve for a good, the marginal
revenue of a potential monopolist, and the marginal cost before an innovation (MC1 =
1) and after a potential innovation of size y (MC2 = 1/y).
In the initial period, all firms have the same marginal cost MC1. A single firm can
choose to try to innovate. If it is successful, it becomes a monopolist in the second
period with marginal cost MC2.
1
1/Y
Demand
Marginal revenue
MC1
MC2
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Chapter 12 Solutions
Principles of Economics (12th Edition)
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