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 13, Problem 2.1P
(a)
To determine
The statements for price and marginal revenue.
(b)
To determine
Pricing in a
(c)
To determine
Demand elasticity and marginal revenue.
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Do you agree or disagree with each of the following statements? Explain your reasoning. a. For a monopoly, price is equal to marginal revenue because
a monopoly has the power to control price.
b. Because a monopoly is the only firm in an industry, it can charge virtually any price for its product.
c. It is always true that when demand elasticity is equal to –1, marginal revenue is equal to 0.
Sara is a single-price, profit-maximizing monopolist who sells her own patented perfume (shown in the graph below).
a. What is the equilibrium price and quantity under monopoly conditions?
b. If instead Sara had to operate like a competitive firm, what would be the equilibrium price and quantity?
c. What is the deadweight loss and total loss to consumer surplus when Sara operates as a monopoly?
d. How much surplus would Sara have if she could act as a perfectly price-discriminating monopolist?
**YOU ONLY HAVE TO ANSWER QUESTION H**
Chapter 13 Solutions
Principles of Economics (12th Edition)
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- Hi. I have this question for an assignment, I think someone doing an example step by step would be extremely helpful. So, if someone could pick whatever demand function they want and answer the following questions, that would be greatly appreciated.a) If the MC is $8/unit, find the equilibrium price and quantity under perfect competition and Monopoly. b) If the government places a tax of $2/unit on production in each case, find the new price and quantity under perfect competition and Monopoly. c) Comment on the incidence of the tax in each case.arrow_forwardSuppose a monopoly's price elasticity of demand equals -2 and the marginal cost of production equals $400.00. The profit-maximizing price is $ - (Enter a numeric response using a real number rounded to two decimal places.) What will be the firm's markup? When maximizing profit, the monopoly's markup is percent. (Round your response to the nearest percent.) tv 20 MacBook Air DII 80 F7 F4 F3 F2 & @ %23 3 4 7 9 { W E R T Y 一 P F G H J K > C V command op nd ...- * C0 Barrow_forwardA natural monopoly is most likely to occur in which of the following industries? Group of answer choices a. the pharmaceutical industry because the development and approval of new drugs through the Food and Drug Administration can take more than 10 years b. the diamond mining and marketing industry because one firm can control a key resource c. the software industry because of the importance of network externalities d. an industry where fixed costs are very large relative to variable costsarrow_forward
- Review the graph at right. What is the unregulated monopoly price? $60 (enter your response as a whole number) What is the unregulated monopoly output? (enter your response as a whole number) The total unregulated welfare (CS+PS) is $. (round your answer to the nearest penny) What is the optimal monopoly regulated price? S response as a whole number) (enter your The total regulated welfare (CS+ PS) is $ (round your answer to the nearest penny) Price 100- 90- 80- 8 70- 60 50 40 30- 20 PHS00 MC $30 104 Okt 0 Monopoly QMR ++ 10 20 30 40 50 60 70 80 90 100 Quantity MC C Qarrow_forwardA monopoly barber sells haircuts to adults for 30 and A monopoly barber sells haircuts to adults for $30 and to children for $10. Let ηΑ represent adults’ elasticity of demand for haircuts and let ηC represent children’s elasticity of demand.a. Explain why |ηΑ| and |ηC| must both be greater than 1.b. Find a formula for ηA in terms of ηC.c. What is the largest possible value for |ηΑ|? A monopoly barber sells haircuts to adults for 30 andarrow_forwardHow do I figure out the second part?arrow_forward
- The table below shows cost data for producing different amounts of cleaning products. Suppose this market is a monopoly. Use the information in the table to find the output where the monopoly would maximize profit. Price ($) Quantity Total Revenue ($) Total Cost ($) 150 0 0 100 120 5 600 180 100 10 1000 400 90 15 1350 675 80 20 1600 1120 70 25 1750 1750 Profit maximizing quantity: What is the profit the monopoly achieved? $arrow_forwardDraw the graph. If the monopoly is a single price monopoly (usual monopoly, as in chapter 10), then: the monopoly produces a quantity Q = ______ where ________________ (which curves intersect?) the monopoly charges a price of P = ________ the consumer surplus is CS = ______ (identify the area on the graph and calculate it). the producer surplus is PS = _________(identify the area on the graph and calculate it). the deadweight loss of the monopoly (as compared to the perfect competition) is DWL = ______ (identify the area on the graph and calculate it).arrow_forwardDraw an example of a monopoly with a linear demand curve and a constant marginal cost curve. a. Show the profit-maximizing price and output and and identify the areas of consumer surplus, producer surplus, and deadweight loss. Also show the quantity that would be produced if the monopoly were to act like a price taker. b. Now suppose that the demand curve is a smooth concave-to-the-origin curve (whose ends hit the axes) that is tangent to the original demand curve at the point Explain why the monopoly equilibrium will be the same as with the linear demand curve. Show how much output the firm would produce if it acted like a price taker. Show how the welfare areas change. c. Repeat the exercises in part b if the demand curve is a smooth convex-to-the-origin curve (whose ends hit the axes) that is tangent to the original demand curve at the pointarrow_forward
- Create a scenario in which a monopoly might form and analyze that monopoly situation. To do that, please complete the following: Describe your fictitious company and its product that it sells on the market. Explain the barrier that you have that makes this company a monopoly. 1. Draw and post a monopoly diagram for that company and show that company earning profits.arrow_forwardIs a monopoly always bad for society? Question 6 options: None of the other answers is correct Yes. Monopoly is always bad Monopoly is not bad if its owner gives back to society in charity No. For example, patents on medications create monopolies, and increase the price and reduce the quantity sold, but without them, no one would take the high costs of developing new drugs and the quantity will be... zero!arrow_forwardPlease explain.arrow_forward
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