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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Question
Chapter 14, Problem 2.3P
To determine
Identify the collusion agreements leading to monopolistic actions.
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10. Competitive Supermarkets
A small town is served by many competing supermarkets, which all have the same constant marginal cost.
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the difference in the prices she will charge to these two groups?
O
O
O
O
$0
$1
$2
$0.50
$3
$4
Price ($)
10
9
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7
6
5
4
3
2
1
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Chapter 14 Solutions
Principles of Economics (12th Edition)
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- Suppose a monopoly is producing at its profit-maximising (loss-minimizing) quantity, and the price corresponding to this quantity is below average total cost but above average variable cost. The monopoly will shut down in the short run but return to production in the long run shut down in the short run and exit the market in the long run keep producing both in the short run and in the long run keep producing in the short run but exit the market in the long run None of the above.arrow_forwardName a firm of business that is selling a good or item that is not so unique. However, in the local market, it's able to enjoy monopoly power. Although it's a monopoly, you don't see other firms entering the market. Name one possible entry barrier that could be keeping other firms from entering and competing with the suggested business.arrow_forwardConsider the local cable company, a natural monopoly. The following graph shows the monthly demand curve for cable services and the company's marginal revenue (MR), marginal cost (MC), and average total cost (ATC) curves.arrow_forward
- Intel is the world’s largest manufacture of semiconductor chips by revenue. During the 1990s, Intel became the dominant supplier of microprocessors for PCs and was known for aggressive and anti-competitive tactics in defense of its market position. Consider the market for Intel’s Pentium II processor, released in May 1997. Assume Pentium II enjoyed a monopoly in computer processors. Intel’s cost of production is characterized by function C = 10Q2, marginal cost MC = 20Q, while the market demand for the product is P = 400 − 10Q. Calculate Intel’s profit-maximizing quantity for its Pentium II processor. How much would Intel price its Pentium IIs?arrow_forwardA monopolist can produce at a constant average and marginal cost of ATC = MC = $5. It faces a market demand curve given by Q = 53 - P. Suppose there are N firms in the industry, all with the same constant MC = $5. Find the Cournot equilibrium. How much will each firm produce, what will be the market price, and how much profit will each firm earn? Also show that as N becomes large, the market price approaches the price that would prevail under perfect competition. (Hint: your answers will be functions of N)(BONUS)arrow_forwardLagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (0) curves that Lagatt Green faces for beer in Lightington. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE(Dollar per bottle) 4.00 3.50 2:50 2:00 1.50 0 MO 05 MR ATC 2.5 QUANTITY (Thousands of bottles of beer) 35 D Monopoly Outcome Profe Lossarrow_forward
- Consider the following data for a monopolist firm. At which quantity does the monopoly firm maximize its profits (or minimize its losses)? At this quantity, what is the firm's profit (or loss)? Output Price Total Revenue Total Cost 300 $9 $2,700 $3,300 400 $8 $3,200 $3,650 500 $7 $3,500 $3,950 600 $6.33 $3,800 $4,000 700 $5.50 $3,850 $4,200 800 $4.50 $3,600 $4,700arrow_forwardHow do you find the profit maximizing PRICE (not level of output) on a graph for a monopoly with demand, marginal revenue, marginal cost, and average total cost curves. Group of answer choices Find the minimum point on the ATC curve and go straight over to the price axis. Find the point where MR = MC and go straight over to the price axis. Find the point where MR = MC, go straight up until you hit the demand curve, and then go straight over to the price axis. Find the point where demand hits marginal cost and go straight over to the price axis.arrow_forwardConsider an industry with the demand curve (D) and marginal cost curve (MC) shown in the accompanying diagram. There is no fixed cost. If the industry is a single-price monopoly, the monopolist’s marginal revenue curve would be MR. Answer the following questions by naming the appropriate points or areas. The horizontal axis is labeled Quantity, and the vertical axis is labeled Price. The quantities marked along the horizontal axis, from left to right, are I, M, S, and T. The prices marked along the vertical axis, from top to bottom, are A, B, C, and E. The M C curve is a horizontal line that extends from Price E marked along the vertical axis. A point L is marked on the M C curve, where quantity is M and price is E. The demand curve is a negative slope line that extends from price A, intersects the M C curve at a point R, and ends at quantity T on the horizontal axis. Point R is marked, where quantity is S and price is E. Two more points, F and K, are marked on the demand curve, where…arrow_forward
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