PRIN.OF ECON.ACCESS CODE
2nd Edition
ISBN: 9780393691757
Author: Mateer
Publisher: NORTON
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 1QFR
To determine
The comparison of the
Expert Solution & Answer
Answer to Problem 1QFR
Oligopoly:
P>MR
A price decrease is followed by the competitor but a price increase is not followed.
Monopoly:
At equilibrium, P>MR (=MC)
Monopolistic Competition:
At equilibrium, Price, P=AC and P>MR (=MC)
Explanation of Solution
We shall first discuss certain features for the market structures:
Oligopoly:
- Few sellers exist.
- Products may be differentiated or homogeneous.
- industry output is by a few firms.
- advertisement and selling costs.
- strategic interdependence of firms.
- natural or technical barriers to entry.
- Kinked demand curve due to interdependence among firms.
- A price decrease is followed by the competitor, but a price increase is not followed.
- Supernormal profits
Monopoly:
- only a single seller exists
- product is differentiated.
- low price elastic of demand for own good i.e.
inelastic demand for own good - very low cross-
price elasticity of demand i.e. no close substitutes exist - strong barriers to entry (natural or technical)
- supernormal profits in the long run
Monopolist Competition:
- existence of large number of sellers.
- free entry and exit of firms.
- products are differentiated.
- existence of selling costs.
- cross-price elasticity of demand is high but not very high
- only normal profits in the long run.
Now, let's define the output and price determination conditions for each market.
Oligopoly:
Equilibrium condition:
MR=MC
P>MR
A price decrease is followed by the competitor but a price increase is not followed.
Equilibrium price corresponds to the kink in the demand curve.
Monopoly:
Equilibrium condition:
-MR=MC
-Slope of MC > slope of MR
At equilibrium, P>MR (=MC)
Monopolistic Competition:
Equilibrium condition:
-MR=MC
-Slope of MC > slope of MR
At equilibrium, Price, P=AC and P>MR (=MC)
Economics Concept Introduction
Oligopoly: Oligopoly is a market structure where only a few sellers exist and products may be differentiated or homogeneous.
Monopoly: Monopoly is a market structure where only one seller exists, and product is differentiated.
Monopolist Competition: Monopolistic competition is a market structure where large number of sellers exist and products are differentiated.
Total Revenue (TR): Total revenue is the total proceeds from the sale of a given level of output.
Total Cost (TC): Total cost is the total outlay in the production of a given level of output.
Marginal Revenue (MR): Marginal revenue is the additional revenue generated by the sale of an additional unit of output.
Marginal Cost (MC): Marginal cost is the addition to total cost when an extra unit of output is produced.
Average Cost (AC): Average cost is defined as total cost divided by the corresponding level of output.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
A young woman plans to retire early in 25 years. She believes she can save $10,000 each year starting now. If she plans to begin withdrawing money one year after she makes her last payment into the retirement account (i.e., in the 26th year), what uniform amount could she withdraw each year for 30 years, if the account earns an interest rate of 8% per year?
a) Correctly plot the cash flow diagram with its respective vectors, arrowheads, units, and currency values. b) Correct mathematical approach and development, use of compound interest factors.c) Financial logic in the development of the exercise and application of the concept of time value of money. d) Final numerical answer and writing in prose with a minimum of 20 words and a maximum of 50 words of the obtained numerical interpretation.
A hospital charges $200 for a medical procedure, and 1,000 patients use the service. The
hospital raises the price to $250, and the number of patients drops to 900. Calculate the
price elasticity of demand (PED) and explain your answer. (show all working)
Briefly explain how elasticity affects government health policies in the following cases:
• Taxes on unhealthy products (cigarettes, alcohol, sugary drinks)
• Subsidizing Preventive Care (e.g., vaccines, screenings)
Drug Price Controls & Generic Substitutions
Co-Payments & Insurance Design
Assume the United States is a large consumer of steel, able to influence the world price. DUS and SUS denote its demand and supply schedules in Figure 1. The overall (United States plus world) supply schedule of steel is denoted by SUS.+W. Figure 1 Import Tariff Levied by a Large Country Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volumE
Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volume of steel imports by the US. [5 marks] b) Suppose the United States imposes a tariff (t) of $100 on each ton of steel imported. With the tariff, calculate the price of steel and the volume of steel imports by the US. [5 marks] c) Of the $100 tariff, how much is passed on to the US consumer via a higher price, and how much is borne by the foreign exporter? [5 marks] d) Calculate the tariff's deadweight welfare loss to…
Chapter 13 Solutions
PRIN.OF ECON.ACCESS CODE
Knowledge Booster
Similar questions
- 1. A doctor quits his job, which pays $77,000 per annum, to open a non-governmental organization (NGO) to serve the needs of orphans. His annual expenses for the NGO amounts to $62,700 for food and daily supplies, $9,400 for maintenance, and $1,800 for books. What is his opportunity cost of opening the NGO? (Show working) 2. During the COVID-19 pandemic, hospitals worldwide faced severe resource constraints, including: a. Limited ICU beds b. Shortage of ventilators c. Insufficient doctors and nurses d. Lack of vaccines in early 2021 Governments and hospitals had to make critical decisions about who receives treatment first and how to allocate limited resources efficiently. In no more than 150 words and using core economic concepts of scarcity, choice and opportunity cost, how would you help your government make these critical decisions?arrow_forwardWhat is the argument about necessary evil?arrow_forwardWhat are the consequences of declining houses prices?arrow_forward
- Q1 Explain what economic catch 22 is. Q2 What are the consequences of declining houses pricing? Q3 What is the argument about necessary evil? Q4 Explain the idea of irrational exhuberance? Q5 Explain what was the economic paradox?arrow_forward< Files 9:10 Fri Mar 21 Chapter+11-Public+Goods+and+Common+Res... The Economic Catch-22 By Robert J. Samuelson We are now in the "blame phase" of the economic cycle. As the housing slump deepens and financial markets swing erratically, we've embarked on the usual search for culprits. Who got us into this mess? Our investigations will doubtlessly reveal, as they already have, much wishful thinking and miscalculation. They will also find incompetence, predatory behavior and probably some criminality. But let me suggest that, though inevitable and necessary, this exercise is also simplistic and deceptive. -- business It assumes that, absent mistakes and misdeeds, we might remain in a permanent paradise of powerful income and wealth growth. The reality, I think, is that the economy follows its own Catch-22: By taking prosperity for granted, people perversely subvert prosperity. The more we managers, investors, consumers - think that economic growth is guaranteed and that risk and…arrow_forward2.) Using the line drawing tool, plot and label the isocost line. Carefully follow the instructions above, and only draw the required objects. FILL IN BLANK d. Now suppose the price of labour rises to $5 per unit, but the firm still wants to produce 500 tires per day. Explain how a cost-minimizing firm adjusts to this change (with no change in technology). A cost-minimizing firm will be producing on ▼ The samedifferently slopedparallel isocost line. The firm will use ▼ moresameless labour and ▼ less the same amount of more capital and produce on ▼ a higher point on the same a lower point on the same a lower a higher isoquant curve.arrow_forward
- QK Using the graph on the right, determine how the firm should change the quantity of the production factors in order to reduce the costs. The firm that is producing at point A can reduce its costs for producing 2000 units by employing A. same capital and more labour. B. less capital and more labour. ○ C. less capital and the same labour. D. more capital and more labour. OE. more capital and less labour. C A B Q =4000 Q = 2000 C Isocost line QLarrow_forwardPL Suppose the price ratio is the same along isocost PK lines A and B. In the figure at right, the difference between isocost line A and isocost line B is that A. the total cost is larger along B. B. the total cost is larger along A. OC. labour is relatively more expensive along A. ○ D. the level of output is lower along A. OE. both capital and labour are relatively cheaper along A. Capital B Labourarrow_forwardUsing the graph on the right, determine the per unit prices of capital and labour. 20- Given the information provided about the isocost lines, we know that the per unit price of capital is TC=$100 and the per unit price of labour is 16- TC $80 ○ A. $50; $20 ○ B. $2; $5 ○ C. $5; $2 ○ D. $20; $50 E. not determinable; not determinable Quantity of K 12 TC $60 TC $40 0 10 20 30 Quantity of L 40arrow_forward
- The diagram to the right contains isocost lines A and B. If the price of capital is the same for both lines, then the difference between isocost line A and isocost line B is that OA. the total cost is larger along B. B. the level of output is lower along A. C. both capital and labour are cheaper along A. OD. labour is more expensive along A. ○ E. labour is more expensive along B. Capital Labourarrow_forwardFor the firm whose cost curves are shown at right, the minimum efficient scale is ○ A. between 60 and 140 units of production. OB. about 20 units of production. OC. about 60 units of production. OD. about 100 units of production. OE. the level of fixed cost corresponding to SRATC2. SRATC₁ LRAC SRATC4 SRATC₂ SRATC3 เนด เad iso C 20 20 40 60 80 100 120 140 160 180 200 Output per Periodarrow_forwardSRATC₂ SRATC3 In the figure, increasing long-run average total costs for the firm are confined to the output range OA. where the LRAC curve is downward sloping. B. above 80 units of output. O C. above 50 units of output. OD. between 50 and 80 units of output. SRATC₁ OE. between 10 and 100 units of output. ---- SRATC LRAC 10 20 30 40 50 60 70 80 90 100 Output per Periodarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning