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 2.8P
To determine
Impact of banning paid prioritization.
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Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit,
use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple
rectangle (diamond symbols) to shade in the area representing the loss.
4.00
3.50
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2.50
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АТC
1.50
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0.50
MC
MR
0.5
1.0
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QUANTITY (Thousands of cans of beer)
PRICE (Dollars per unit)
Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the
green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle
(diamond symbols) to shade in the area representing its loss.
4.00
3.50
Monopoly Outcome
3.00
2.50
Profit
АТС
2.00
Loss
1.50
1.00
MC
0.50
D
MR
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
QUANTITY (Thousands of cans of beer)
PRICE (Dollars per can)
Chapter 13 Solutions
Principles of Economics (12th Edition)
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- Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and combined quantity of output if Mays and McCovey choose to work together. 2.00 Demand 1.80 Monopoly Outcome 1.60 1.40 MC = ATC 1.20 1.00 0.80 0.60 0.40 0.20 MR 90 180 270 360 450 540 630 720 810 900 QUANTITY (Cans of beer) PRICE (Dollars per can)arrow_forwardHelp with grapharrow_forwardConsider the only internet service provider in a small town, which you can assume operates as a natural monopoly. The following graph shows the demand curve for internet services per month, as well as the provider's marginal revenue (MR) curve, marginal cost (MC) curve, and average total cost (ATC) curve. PRICE (Dollars per subscription) 100 90 80 70 40 20 10 0 0 2 || Pricing Mechanism Profit Maximization 4 Complete the first row of the following table. MR 8 10 12 14 QUANTITY (Thousands of subscriptions) Marginal-Cost Pricing Average-Cost Pricing O True Suppose the government has elected not to impose regulations on the industry, and so the firm faces no regulatory constraints in maximizing profits. O False 16 ATC -MC Complete the third row of the previous table. 18 20 D Short Run Price Quantity (Subscriptions) (Dollars per subscription) Suppose now that the government decides to require the monopolist to set its price equal to marginal cost. Profit Complete the second row of the…arrow_forward
- Ch 15. #3 How do I solve this?arrow_forwardCase study 1.8: Mobile phone networks Predatory roaming They were in the bank, toting guns, as lots of money happened to go from the vault. That was the essence of last week’s claim by Mario Monti, the European Union’s competition commissioner, that mobilephone operators have gouged customers by colluding to raise rates for roaming – ie, when you use your mobile phone abroad. Mr Monti’s case is circumstantial, but he says the network operators will have to answer it. 324 STRATEGY ANALYSIS In December Mr Monti’s office issued a report on the market for roaming. Most countries in the European Economic Area (EEA), the report found, have a roaming market that is ripe for collusion. The product is undifferentiated, and the number of sellers small. Pricing in the wholesale market is transparent, making it easy for a market leader to raise prices, and for other operators to take the hint and follow suit. The costs of running mobile networks do not vary that much. As a result, says the…arrow_forwardConsider the firm Novo Nordisk and the production of Ozempic, a class of diabetes drugs which can additionally be used to treat weight-loss by mimicking GLP-1 to suppress appetite. At present, the firm has mostly a monopoly on this kind of injectable drug where semaglutide is the key active ingredient. For some context, read the following freely available articles: 1. https://theconversation.com/ozempic-the-miracle-drug-and-the-harmful-idea-of-a-future-without-fat-211661 2. https://fortune.com/europe/2024/03/28/ozempic-maker-novo-nordisk-facing-pressure-as-study-finds-1000-appetite-suppressant-can-be-made-for-just-5/ [or, access via Login to Curtin Library: https://search.ebscohost.com/login.aspx?direct=true&AuthType=sso&db=bsu&AN=176267009&site=ehost-live&custid=s8423239] 3. https://www.usatoday.com/story/news/health/2024/03/29/ozempic-wegovy-weight-loss-diabetes-drug-cost/73125135007/ 4.…arrow_forward
- The following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local gas company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. 20 18 Monopoly Outcome 16 14 12 10 8 ATC MC MR 2 3 5 7 8 10 QUANTITY (Hundreds of cubic feet) Which of the following statements are true about this natural monopoly? Check all that apply. The gas company is experiencing economies of scale. The gas company must own a scarce resource. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The gas company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies always earn zero profit in the long run. True False D. 2. PRICE…arrow_forwardThe following graph shows the demand (D) for gas services in the imaginary town of Utilityburg. The graph also shows the marginal-revenue (MR) curve, the marginal-cost (MC) curve, and the average-total-cost (ATC) curve for the local gas company, a natural monopolist. NOTE: read question carefully and answer accordinglyarrow_forwardThe following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. Which of the following statements are true about this natural monopoly? Check all that apply. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The cable company is experiencing economies of scale. The cable company must own a scarce resource. The cable company is experiencing diseconomies of scale. True or False: Without government regulation, natural monopolies never earn zero profit in the long run. True Falsearrow_forward
- Please a detailed type response to the question below. Make sure the graph is clear and visible. Double-check your answer and work too!arrow_forwardQuestion C2 The Australian Competition and Consumer Commission (ACCC) has opened an investigation regarding collusion between the two major firms producing fire protection gear for bush firefighters. The firms - Azure Associates and Blue Guard - contend that they are quantity competitors and that the prices they are charging are a result of an increase in price by their suppliers. As part of the case, the ACCC has noted that the Australian firefighters typically purchase their own protective gear and are thus price takers in the market. Both the ACCC and the two firms under investigation agree that the market demand can be described by the inverse demand function: P(Q)=240-Q, where Q is the total quantity provided by the two firms (i.e., Q=q₁ + 9B, where is the 9A amount produced by Azure Associates and q, is the amount produced by Blue Guard). All parties also agree that the two firms have identical production technologies and that the two firms have the same constant marginal cost of…arrow_forwardHomework (Ch 15) 1. Sources of monopoly power Monopolists, unlike competitive firms, have some market power. A monopolist can increase price, within limits, without the quantity demanded falling to zero. The main way it retains its market power is through barriers to entry--that is, other companies cannot enter the market to create competition in that particular industry. Complete the following table by indicating which barrier to entry appropriately explains why a monopoly exists in each scenario. Barriers to Entry Scenario In the natural gas industry, low average total costs are obtained only through large scale production. In other words, the initial cost of setting up all the necessary pipes and hoses makes it risky and, most likely, unprofitable for competitors to enter the market. Patents are granted to inventors of a product or process for a certain number of years. The reason for this is to encourage innovation in the economy. Without the existence of patents, it is argued,…arrow_forward
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