To find:
Whether the given option is a
Answer to Problem 1P
The option a. Mrs. K (an actress), option b. DB Diamond Company and option c. The only doctor in a small town can be considered as monopoly.
Explanation of Solution
Mrs. K (an actress), DB Diamond Company and the only doctor in a small town, all these hold the characteristics of a monopoly firm. Mr. K is not the only actress, but she has a monopoly over her service or acting and she has full control over the
The only doctor in a small town has a monopoly and he or she is the single seller of the service. Hence, the doctor can enjoy all the market share. Thus, the doctor can be considered as monopoly.
The F motor company cannot be a monopoly, it can be oligopoly. This type of company is not the only single seller in the market. However, in field of motor companies there are very few companies and they sell almost close substitutes. Hence, it is a case of oligopoly.
Monopoly market:
Monopoly refers to that market structure, where a single seller enjoys the largest market share along with many buyers and the product sold by monopoly have no close substitutes. In the monopoly market, the seller is free to charge any price for their product and the entry of new firms in this market is very difficult.
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Chapter 13 Solutions
Exploring Microeconomics
- 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?arrow_forwardWhat is a legal monopoly?arrow_forwardWhat is a natural monopoly?arrow_forward
- 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?arrow_forwardC. The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce? What will its profits be? Quantity Price per Unit Total Cost 10 $10 $20 20 $8 $50 30 $6 $65 40 $4 $90 50 $2 $120arrow_forwardHow does monopoly affect society’s well-being?arrow_forward
- Which of the following in your view , is the BEST example of a NATURAL monopoly . Note some of these may not even be natural monopolies. a.The production of electricity b.delivering packages (UPS and similar companies) c.The monopoly Microsoft holds in the operating system market d.The delivery of electricity to homes.arrow_forwardJackie, Jerry, and Johnny run the only saloon in town. Jackie wants to sell as many drinks as possible without losing money. Jerry wants the saloon to bring in as much revenue as possible. Johnny wants to make the largest possible profits. Examine the monopoly diagram below that contains the demand, marginal revenue, and cost curves of the saloon. Determine the price-quantity combinationarrow_forward7 Which of the following is most likely a monopoly? A Local fast-food restaurant BO Local bathroom fixtures shop Local television broadcaster DO Local electricity distributorarrow_forward
- The following graph shows demand, MR, and cost curves for a monopoly in the short run: 12 11 SMC 10 ATC 8 AVC 2 1 10 20 30 40 50 60 70 80 90 100 110 120 Output MR a. Profit is maximized at a price of $– b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $- and profit is $- total cost is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P - ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. Price, marginal revenue, and cost (dollars)arrow_forward2arrow_forward
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