Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Textbook Question
Chapter 14, Problem 14.4P
Suppose the market for Hula Hoops is monopolized by a single firm.
a. Draw the initial equilibrium for such a market.
b. Now suppose the
c. Consider three possible ways in which the price elasticity of demand might change as the demand curve shifts: It might increase, it might decrease, or it might stay the same. Consider also that marginal costs for the monopolist might be increasing, decreasing, or constant in the range where MR=MC Consequently, there are nine different combinations of types of demand shifts and marginal cost slope configurations. Analyze each of these to determine for which it is possible to make a definite prediction about the effect of the shift in demand on the price of Hula Hoops.
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